Switzerland is one of Europe’s leading asset management hubs. Foreign asset managers view Switzerland as an attractive jurisdiction to offer their clients high-quality asset management and investment advisory capabilities. Asset managers establishing a presence in Switzerland commonly use Luxembourg fund structures to expand their European and international investor base. Luxembourg funds are well recognised by investors beyond Swiss borders, making them an effective vehicle to support an asset manager’s growth.  

When the Luxembourg fund is managed by an EU-based Luxembourg Alternative Investment Fund Manager (EU AIFM), the fund can also be offered under an EU marketing passport, which, for example, facilitates distributions to professional investors within the EU. EU-based AIFM services are offered by service providers in Luxembourg and may therefore be contracted by a Swiss asset manager. The EU AIFM effectively acts as an intermediary between the Swiss asset manager and the Luxembourg fund in relation to the fund’s management.

If such a set-up is chosen, there are two ways to connect the Swiss asset manager to the Luxembourg fund through the Luxembourg AIFM. Under the first option, the Luxembourg AIFM assumes responsibility for fund management but delegates investment decisions (portfolio management) to the Swiss asset manager. The Swiss asset manager is then responsible for the buy and sell decisions. In that case, the Swiss manager requires a Swiss licence issued by the Swiss Financial Market Supervisory Authority (FINMA) to act as a manager of the fund. For smaller Swiss managers, or firms establishing a Swiss presence, this licensing process can be particularly demanding, both in terms of complexity and resources.

Alternatively, the Luxembourg AIFM may be advised by the Swiss asset manager. Under this model, the Swiss entity can operate without a FINMA licence, while remaining subject to certain regulatory and compliance obligations. In this set-up, the Swiss asset manager provides investment recommendations but may not make investment decisions itself. Instead, the Luxembourg AIFM retains decision-making authority regarding the investments. In practice, the AIFM will rarely disregard the asset manager’s recommendations. As an example, the AIFM will disregard an investment recommendation if it conflicts with the fund’s strategy or investment parameters.

For many managers, this advisory model represents more than an acceptable trade off: it secures EU market access in exchange for relinquishing ultimate control over investment decisions. Swiss asset managers and their advisers are generally comfortable with this set-up.

Importantly, the Swiss investment advisory model is not limited to Luxembourg fund structures. It may also be used in a wide range of cross-border advisory arrangements, subject to the local regulatory treatment of inbound investment advice. This flexibility makes it an attractive option for managers, seeking to integrate Swiss advisory capabilities into a global strategy.

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