New regulatory regime augurs well
Right now, hedge fund managers are busy preparing for life as authorised entities under FINMA, the Swiss financial regulator. They have until 1 March 2015 to get their house in order and complete the authorisation process.
Under the revised Collective Investment Schemes Act (CISA), Switzerland is demonstrating both to the EU and the wider global financial industry that it means business. No longer will asset managers operate under a veil of secrecy. Transparency is the order of the day, along with regulatory oversight that is set to bring Swiss managers in line with their EU counterparts.
Swiss managers are taking the changes in their stride. As Markus Fuchs, (pictured) Managing Director of the Swiss Funds & Asset Management Association (SFAMA), comments, there are clear signs that a good percentage of Switzerland’s 300 or more hedge fund managers are already embarking on the authorisation process:
“We have contact with a lot of hedge fund managers and approximately 50 or so managers are now commencing with their FINMA applications. That’s a good sign. It increases the predictability and stableness of the asset management industry here in Switzerland and removes any uncertainty.”
Asked whether this new era of regulation could act as a fillip for Switzerland’s hedge fund industry, reassuring institutions that the managers they allocate to are FINMA-approved, Fuchs adds: “Yes, I tend to agree with that statement. If you think about investors from Asia, Latin America, they might prefer asset managers from Switzerland relative to other fund management domiciles because of the strengths and advantages of Switzerland. It’s definitely a positive.”
It will take time to determine whether the revised CISA will translate into greater hedge fund AuM but there are early signs that this is happening. According to SFAMA’s latest figures, the Swiss fund market grew by 2 per cent in February and attracted net asset inflows of CHF4bn. Alternative funds accounted for CHF683m of those net inflows.
“Investors increasingly request that an asset manager fulfils certain standards and is subject to regulation. Some might argue that regulation is not needed to protect institutional investors but it’s not an argument I support. They require regulated asset managers,” states Fuchs.
The potential for Swiss-based managers to tap into assets is huge. Some CHF5trn of securities are booked there. It is home to 12 per cent of the world’s 500 largest money managers and 20 out of 108 multi-manager firms with assets north of USD1bn. Factor in that 94 of the world’s 300 largest retirement funds are in easy reach within Europe and the signs are that managers operating out of Switzerland could prosper going forward as the country embraces regulation.
Even smaller managers running less than CHF100m, and which therefore are not required to register with FINMA, might consider registration to become more ‘institutionally friendly’ and boost their asset raising capabilities.
Fuchs confirms that SFAMA is preparing to embark on a promotional exercise to showcase the benefits of Switzerland to the wider market.
“We are working on an initiative but first we need to complete our analysis of Switzerland’s regulatory framework, after which we will start to conduct roadshows in Asia and Latin America. We hope to do this before the end of 2014.
“We have 27 per cent market share of private banking cross-border asset flow and that number is growing. This shows that people still value Switzerland as a place to book their wealth.”
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