All hail the Swiss Collective Investment Scheme Act (CISA)

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It is now one year in to the Swiss Collective Investment Scheme Act (CISA) and overall impressions appear to be that it has been a success. One particular aspect of CISA, namely the requirement for alternative fund managers marketing their funds in Switzerland to “unregulated qualified investors” (eg pension funds, family offices) to appoint a Swiss Fund Representative and Paying Agent, has proven to be no more than a mild shower in a teacup.

A year ago, fund managers were aghast at the idea of having to incur yet more regulatory costs, but those fears have proven to be largely unfounded. Indeed, as Roman Pelka (pictured), CEO of Montfort Funds AG, a specialist provider of Swiss fund representation services, says, almost incredulously: “I think this has actually been a regulatory success. We are 12 months in and 2,000 to 3,000 alternative funds have signed up, including most of the major names. There has been a broad acceptance of the regulation. I think the Swiss regulator FINMA has succeeded in introducing a piece of regulation that is simple and works.”
If one assumes that half that number are hedge funds that is a significant number for a single country. Given that some 6,000 traditional funds are authorised for retail distribution in Switzerland, the fact that approximately 45 per cent of that number has been achieved for alternative funds under CISA in just 12 months is a testament to just how well the rules have been embraced.
In the survey, only 10 per cent of managers said they rely on reverse solicitation, and only 10 per cent decided not to market in Switzerland. Adoption of the rules is now widespread, with 68 per cent of respondents confirming they now have a Swiss legal representative in place.
Pelka attributes this to the relative simplicity and cost effectiveness of the Swiss rules.
“It only takes two to three weeks to appoint the Swiss legal representative and costs USD10-15K per annum. If you raise USD1 million, you’re talking a 1.5 per cent cost. Increasingly major law firms advise against marketing on a pure reverse solicitation basis.
We are now one of the leading Swiss representative providers, representing 6 of the top 10 global alternative investment managers,” confirms Pelka, a former Managing Director at the Carlyle Group, one of the world’s largest PE groups. 
The role of the Swiss representative is two-fold. One is to act as a point of contact towards FINMA, the other is to supervise the fund’s distributor. “That doesn’t mean we go along to every meeting a fund manager has in Switzerland. Our role is to ensure that the fund and its agent complies with the local rules; it is not intrusive to the manager,” adds Pelka.
“The clarity of rules and relatively low cost of compliance is not putting managers off; for most non European managers, in fact, the European market has effectively been reduced to the UK under the private placement regime and Switzerland under CISA.
Switzerland remains a highly attractive market from an asset raising perspective and far outweighs any frustrations that managers feel at having to appoint the Swiss legal representative.
Three quarters of respondents said that they have Swiss investors. Moreover, 84 per cent of managers rank Switzerland in the top 10 countries for capital raising, while 23 per cent even place it in the top three,” concludes Pelka.