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Onshore hedge fund servicing in Switzerland

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Interview with André Valente – The opportunity to leverage onshore administration services for hedge fund managers is gathering momentum in Switzerland. And UBS Fund Services in Switzerland plans to be at the forefront, according to André Valente (pictured) who heads up the business.

This view is based on the premise that, despite regulatory changes, increasing interest for alternative investments will continue. And not just in hedge funds, but other “alternatives” as well. For example, as Switzerland moves its energy policy away from nuclear energy towards clean energy, this will likely create a number of private equity and infrastructure deals in the coming years.

“Swiss institutions have between two and 10 per cent of their assets invested in non-traditional asset classes, either wrapped in a FoHF structure or, if the institution is large enough, tailor-made managed accounts. At UBS, in recent months we’ve launched a few products for institutional investors with both Cayman as the domicile for FoHF structures, and Switzerland as the domicile for infrastructure or PE limited partnerships and FoHFs,” says Valente.

It’s this expectation that Swiss institutions will continue to favour alternatives that UBS believes will make Switzerland a compelling market to expand its onshore administration offering. Many of the 300 to 400 hedge fund managers based in Switzerland probably have a relationship in some form or other with UBS (e.g. Prime Services), and as Valente explains:“We are proactively approaching them and saying, ‘You can use our global capability in Ireland, Cayman etc, but we have onshore administration capabilities here so regardless of the operative hub domicile, why not have a single close relationship with us here’.

There are three prerequisites, says Valente, that administrators will need to take advantage of this opportunity. The first is to have a global offering. “If you are a well-established name in the hedge fund industry, as UBS is, your starting point is good. We have a strong footprint in many offshore markets such as Cayman, Singapore, Jersey, and although not exactly offshore, Dublin. We also have a strong footprint in Luxembourg and Switzerland. We can leverage a wide range of services in each market. It is vital to provide managers with everything they need.”

Second is to provide a strong governance framework. UBS is able to support managers in establishing the management company for a Swiss-domiciled product, risk management and legal support. It has a long history in providing effective governance, and with regulation and investor demands for transparency, having the right systems and controls in place is necessary.

The third prerequisite, unsurprisingly, is to provide first-class asset servicing capabilities. “We use Geneva® for single hedge funds and FoHFs. We have a database for sourcing prices for FoHFs worldwide. We are also implementing Investran® for private equity, infrastructure and real estate funds here in Switzerland. And we have already a multi-billion alternative funds administration in Switzerland.That ensures that we have a comprehensive system that can interface seamlessly with the client and deliver accurate, transparent reporting.”

It appears that managers are already showing signs of interest in developing this onshore relationship.

“Some local managers with a German or Swiss background say that if you are able to provide German-based reporting, fantastic. It seems that proximity, in terms of language and culture, could play an important role. It’s still early days but the initial signs are positive.”

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