Hugo Fund Services offers Swiss representation services to foreign fund managers wishing to market their fund(s) to qualified investors into the country. This follows changes to Swiss regulation in March 2015.
Qualified investors are defined under CISA (Collective Investment Scheme Act) as including pension funds, corporates and individuals with at least CHF5m in financial assets. Previously, only those funds that were registered for public offerings – which is now referred to as distribution to non-qualified investors – had to appoint a Swiss representative.
Although Hugo Fund Services was founded in 2014 to cater specifically to alternative fund managers, a joint venture with ACOLIN in January 2018 – the firm is now a wholly owned subsidiary of a newly formed entity, ACOLIN Holdings – has meant that the firm is now also able to offer representation services for retail distribution in Switzerland as well as global distribution services.
“Following the JV with ACOLIN we can support managers anywhere in the world looking to enter Europe,” says Anne-Cathrine Frogg Spadola, co-founder and Managing Partner, Hugo Fund Services. “We manage all infrastructure aspects relating to distribution, whether it is commission calculations, or management of distribution agreements. Data and document management dissemination, as well as EU notification services complete the offering.”
Hugo Fund Services works with alternative managers to review the offering and marketing documents of each fund that wishes to market to Swiss qualified investors. This involves reviewing the manager’s current distribution arrangements in Switzerland, selecting a Swiss paying agent and working closely with the investor relations team to integrate all relevant Swiss legal documentation into their operating business model.
For a typical US hedge fund manager, the two main markets in Europe for capital raising are the UK and Switzerland. “The UK has a straightforward private placement regime that is not overly burdensome. Switzerland also has a very straightforward and pragmatic set of rules,” explains Colin Vidal, Business Development Manager. “You appoint a legal representative and placement agent and then it’s business as usual. There are also a large number of institutional allocators in both markets, although other countries such as the Netherlands, Germany and the Nordics are also quite popular as a second step.”
As far as Swiss regulation goes, Vidal says the challenge is to educate managers. It seems quite complex from the outside but by having the right partner who has gone through this many times, the process is far simpler.
“We have a lot of goodwill with our managers because our whole mindset has always been to keep everything as simple as possible.
“With our set-up today, we are in the perfect position to explain that there are other many markets accessible in Europe beyond the UK and Switzerland. One just needs the right partner that is regulated in the right jurisdictions and that knows how to do it.”
Now, thanks to the JV with ACOLIN, the company supports wider cross-border distribution activities in the EU; either as it relates to full registration under AIFMD or as it relates to NPPR rules for individual EU Member States.
“We manage the infrastructure relating to distribution, ensuring the fund is ready from and operational and regulatory perspective to be introduced to investors or institutions,” says Frogg Spadola. The benefit to managers is that they only require one counterparty relationship to manage for all of their marketing and distribution activities.
“It’s the advisory aspect according to the manager’s marketing strategy and their network”, continues Frogg Spadola, “that we think is the value proposition. Being able to sit with any global fund manager and give them an integrated solution is actually very compelling. ACOLIN Holdings has regulated entities across Europe and we are the only independent entity providing this solution in Switzerland.”
What sets ACOLIN and Hugo Fund Services apart from other institutions offering representation services, many of which are legal firms, is that the team has a manager-focused mindset; individual team members have worked previously in fund-of-fund or private equity firms and as Vidal states: “We bring an investor’s perspective to fully understanding a manager’s fund structure.”
“The way we help is to translate into easy, understandable language what the requirements are and simplify what, from afar, looks complicated,” adds Frogg Spadola. “We sit down with the manager, either traditional or alternative, and determine which markets they are focusing on, where their contacts are, work out the next steps and then determine the amount of work involved and, of course, the cost.
“Depending on the manager’s budget, size of fund, expectations on asset raising, etc, we consult on how best to approach these markets from a time and cost perspective. We are close to investors in Switzerland so we are able to provide firsthand feedback on what investors are looking for, how they approach managers, what type of information managers should have ready, etc.”
Hugo Fund Services represents close to 600 funds for qualified investors and ACOLIN close to 900 funds for retail (non-qualified) investors. When asked what is the most common mistake made by fund managers marketing into Switzerland, Vidal stresses the point that it takes a serious commitment.
In conclusion, Frogg Spadola advises managers to take a close look at their distribution network and appreciate the fact it has become a much more expensive and complicated world: “Be realistic in your expectations and partner with a group that understands your business. It will ease the process and reduce your time to market.”
