By Georges Boivin - Switzerland is the world’s second-largest market for funds of hedge funds after the US, and approximately five per cent of all assets under management are invested in hedge funds, including USD200bn in funds of hedge funds, while the country accounts for around a third of total global assets invested in funds of funds. That means that for the hedge fund services sector, the market offers great growth potential – but maintaining a close relationship with fund manager clients is more important than ever before.
Despite the difficulties in the sector a few years ago, the appetite for funds of hedge funds in the Swiss market is as strong as ever, with investment managers of all sizes currently active in establishing new fund of funds vehicles. In Geneva independent asset managers, including former employees of major banks, are starting up their own firms, and family offices are highly active in the hedge fund industry. By contrast, the industry in Zürich is more dominated by institutional asset managers such as Harcourt Investment Consulting.
With the financial crisis now in the past, confidence is creeping back into the industry. There was a hiatus in the launch of new funds following the Lehman Brothers bankruptcy in September 2008, but investor interest in new vehicles has returned. In addition, the resolution of the debate within the European Union on regulation of alternative fund managers has created certainty for Swiss-based hedge fund firms about their future access to EU-based investors.
Meanwhile, fiscal and legal changes in countries such as the UK are prompting a number of leading hedge fund managers to consider relating all or part of the operations elsewhere – and Swiss municipalities including Pfäffikon, Zug and Nyon have rolled out the welcome mat with attractive tax packages. With top-tier firms such as Brevan Howard and BlueCrest Capital establishing operations in Geneva and Moore Capital coming to Zürich, the appeal of Switzerland as a domicile for hedge fund managers is evident.
The rebound in activity is creating new business opportunities for administrators, not only from independent hedge fund and fund of funds managers but private banks and family offices. However, having a presence on the ground is critical to ensuring high quality of client service and in particular responsiveness to their individual needs.
It is a vital element in building up enduring partnerships with Swiss firms, many of which trace their history back centuries and place a high priority on long-term vision. In addition, the local authorities are keen to promote the establishment of fund service providers as well as managers in order to create a business infrastructure that can enable start-up management firms to thrive.
The philosophy of Apex Fund Services has always been to establish a local presence in the markets where it is active, both to demonstrate its commitment and to develop a better understanding of the goals and requirements of its fund manager clients. In particular, it’s vital to be present on the ground and able to respond quickly at a time of major change in the industry.
Switzerland currently faces growing pains as new regulation and standards of tax transparency come into play, and the country’s private banks and family offices look for alternative structures to the foundations, trusts and Panama companies used in the past. A local presence will help Apex to guide clients through the transition toward regulated products.
Georges Boivin is group legal counsel and managing director of Apex Fund Services (Switzerland)