By Michael Appenzeller - Over the past two years Switzerland has been a focus for hedge fund managers re-examining the location of their business and operations. The country is now among the most attractive jurisdictions in Europe to establish some if not all of the hedge fund value chain, because of not only tax advantages but an entrepreneurial culture rooted in its history as a global financial hub.
Switzerland differs from most offshore financial centres through its strong institutional asset management culture, centred on the Zürich area and clusters such as Zug and Pfäffikon, encompassing pension funds, asset managers and a diverse range of alternative investment expertise including funds of hedge funds and private equity.
One of the country’s key assets as an investment management centre, of course, is its large private client base, including family offices, which are playing an increasingly important role as seed investors in alternative funds. It is also home to platform providers that offer start-up managers access to established distribution channels.
Finally, Switzerland is shaking off its reputation, deserved or otherwise, for being a classic tax haven. The country is one of the most advantageous onshore tax locations globally and today its vast pool of fiscal expertise is focused on legal tax optimisation and structuring in accordance with the global trend toward international transparency and co-operation.
The country’s new breed of hedge fund managers, including both start-up and existing firms, must find the right balance between the stability demanded by investors, including sophisticated, professional, robust and scalable operations and processes, and the agility to seize opportunities quickly while keeping costs under control.
Against this backdrop Etops offers a broad range of operations services to clients including single hedge fund managers, fund of funds firms and long-only asset managers. The firm provides consultancy and outsourcing of institutional middle office operations to help investment managers obtain efficiencies that cannot be achieved in-house.
Etops draws on a very solid IT platform, longstanding hands-on experience in the hedge fund industry as well as experienced resources at a subsidiary in Bratislava, Slovakia, that handles most day-to-day operations for clients.
The firm can undertake all aspects of the value chain outside the trading and asset management functions including shadow accounting, reconciliation, relations with prime brokers, administrators and custodians, risk controls and management, and reporting. Clients benefit from economies of scale through lower fixed payroll charges and the inherent cost-efficiency of operations in Eastern Europe.
Etops clients range from new managers with USD10m in seed capital to well-established firms managing more than USD3bn. Recent new customers include a USD200m manager that has outsourced its middle office, and a fund of funds manager that wants to upgrade and outsource its complete operations. These typify hedge fund firms seeking a new level of stability while developing their ability to serve investors, boosting efficiency and maximising use of their resources.
In addition, Etops offers modular services, for instance carrying out fund of funds reporting for banks that lack in-house expertise, and undertakes project-based work such as the implementation and customisation of IT systems, or devising a set-up and distribution strategy for a manager operating out of Switzerland. The firm offers an integrated array of services to existing and new managers across the entire investment operations value chain.
Michael Appenzeller is founder and chief executive of Etops
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