Dispatch concerning new fund category (L-QIF) published
On 19 August 2020, the Swiss Federal Council adopted the dispatch (Botschaft) concerning the amendment of the Collective Investment Schemes Act and other acts aimed at increasing Switzerland’s competitiveness as a fund location and keeping a bigger part of the value chain of the funds business in Switzerland.
The draft act, which will be discussed in Parliament in the second half of 2020, shall allow for a new category of funds called the “Limited Qualified Investor Fund (L-QIF)”. The L-QIF shall be exempted from the requirement to obtain authorization and approval from the Swiss supervisory authority FINMA allowing a shorter and more cost efficient “time to market”. Investor protection is yet taken into consideration as, amongst others, the new category of funds will be exclusively available to qualified investors and must be managed by a supervised institution.
The product L-QIF is inspired by the Luxembourg Reserved Alternative Investment Fund (RAIF) and shall allow for a quicker and more cost-effective market launch for funds. However, the new regime does not take away the disadvantages of the Swiss funds connected to the lack of access to the EU market and tax aspects.
The L-QIF can be set up as a SICAV, KmGK or contractual fund, allowing maximum flexibility in its form.
The funds benefit from specific investment rules which are supposed to promote innovation and therefore are designed in a more liberal way; the draft act neither provides for restrictions with regard to possible investments nor with regard to risk diversification. Thus, investments in for example infrastructure projects, wine or art and other assets with limited marketability, high price fluctuations and difficult valuation shall be possible. Yet, the draft act provides the funds’ duty to disclose both the possible investments and the risk diversification it applies in the fund documentation. Admissible investment techniques and investment restrictions shall be subject to regulation by an ordinance of the Federal Council but not be stricter than those for existing funds for alternative investments. Similar to other funds that are exclusively distributed to qualified investors, the L-QIF shall not trigger a prospectus requirement.
While the fund itself shall not be supervised, it is required to be managed by institutions which are supervised by the Swiss Financial Market Supervisory Authority (FINMA) and to be audited. If the institution managing the L-QIF violates its duties in doing so, this might result in supervisory measures against it since it indicates organizational shortcomings. That way, an indirect supervisory access is ensured.
The amendment of the Collective Investment Schemes Act is not expected to enter into force earlier than the start of 2022.
Judith RaijmakersPartner Attorney at law
Judith Raijmakers, attorney at law, is a partner in our Zurich and Luxembourg offices. She focuses on finance transactions including acquisition financing, asset financing, real estate and transportation financing, debt (re)structuring and debt issuances.T: +41 43 434 67 24 M: +41 79 870 91 03 E: firstname.lastname@example.org
Diana LafitaAssociate Attorney at law
Diana Lafita, attorney at law, is a member of the Banking and Finance practice group in our Zurich office. She focuses on banking, insurance and capital markets regulatory and private matters.T: +41 43 434 67 49 M: +41 79 368 25 59 E: email@example.com