Introduction

The establishment and operation of Swiss CIS are governed by the Federal Act on Collective Investment Schemes of 23 June 2006 (CISA) and its implementing ordinances: the Ordinance on Collective Investment Schemes of 22 November 2006 (CISO) and the Ordinance of the Swiss Financial Market Supervisory Authority on Collective Investment Schemes of 27 August 2014 (CISO-FINMA). The marketing of Swiss CIS in Switzerland is regulated by the Federal Act on Financial Services of 15 June 2018 (FinSA) and its implementing ordinance: the Ordinance on Financial Services Ordinance (FinSO). Managers of collective assets and fund management companies are regulated by the Federal Act on Financial Institutions of 15 June 2018 (FinIA).

Generally speaking, Swiss CIS can be either open-ended or closed-ended (Article 7, para 2 CISA). The difference between these two forms lies in the liquidity offered to investors. Open-ended CIS give investors a direct or indirect right to redeem their units at net asset value (Article 8, para 2 and Article 78, para 2 CISA), at the expense of the collective assets. Conversely, closed-ended CIS do not give investors any direct or indirect right to redeem their units at net asset value, at the expense of the collective assets (Article 9, para 2 CISA).

Swiss alternative investment funds (AIFs) can be structured in either of these two forms, but the use of Swiss CIS for alternative funds is relatively limited in practice.

Open-Ended Funds

Swiss open-ended CIS take the form of either a contractual investment fund or an investment company with variable capital (SICAV) (Article 8, para 1 CISA).

Open-ended collective investments are further divided into different categories according to their investment policy:

• securities funds (Article 55 et seq CISA);
• real estate funds (Article 58 et seq CISA);
• other funds for traditional investments (Article 70 CISA); and
• other funds for alternative investments (Article 71 CISA).

This last category is logically the most relevant for Swiss AIF.

Contractual investment funds

Contractual investment funds are based on a contract between the investors, the fund management company and the custodian bank (Article 25 CISA). Under the terms of this contract, which is referred to as an investment fund contract, the fund management company manages the collective assets independently and in its own name.

The fund's investors participate in the fund in proportion to the units they have acquired (Article 25, para 1 CISA); the custodian bank essentially safeguards the collective assets, issues and redeems fund units and manages payment transactions (Article 73, para 1 CISA).

The fund contract must comply with certain legal requirements (Article 26, para 3 CISA and Article 35a et seq CISO) and must be submitted to the Swiss Financial Market Supervisory Authority (FINMA) for approval (Article 26, para 1 CISA).

SICAV

The SICAV is an alternative to the contractual investment fund, whose structure is based on Luxembourg SICAV legislation. Like the contractual investment fund, the SICAV is an open-ended CIS, since it allows investors to request the redemption of their units and their repayment in cash at any time (Article 78, para 2 CISA). However, unlike the contractual investment fund, the SICAV is a public limited company governed by the provisions of the Swiss Code of Obligations (CO), subject to the specific provisions of CISA.

Any person recognised by the SICAV as a shareholder may exercise voting rights, with each share in principle entitling the holder to one vote (Article 47, para 1 CISA). However, the decision to dissolve the SICAV and its sub-funds rests solely with the entrepreneur shareholders (Article 41, para 2 CISA). Investors also have a right to information (Article 84, paras 1 and 2 CISA) and may apply to the court at the registered office of the management company for the auditing company or another expert to examine the facts requiring verification and submit a report (Article 84, para 3 CISA). Lastly, investors may bring an action for restitution if assets have been misappropriated or if pecuniary benefits have been unlawfully obtained at the expense of the SICAV (Article 85 CISA).

In terms of pecuniary rights, the SICAV entitles shareholders to a share of the profits (Article 78, para 1, lit b CISA) and to a proportional share of the liquidation proceeds (Article 97, para 2 CISA). Shareholders also have the right to demand the repurchase of their shares and their redemption in cash at any time (Article 78, para 2 CISA). The redemption price is set on the basis of the net asset value per unit on the valuation date, plus or minus any commissions and costs (Article 80 CISA). Limitations on the right to redeem are also possible, as is the case with contractual investment funds.

Other funds for alternative investments

This is a category of open-ended CIS (which can be structured either as a contractual investment fund or as a SICAV), whose investments, structure, investment techniques (short-selling, borrowing of funds, etc) and investment restrictions entail a risk profile that is typical for alternative investments (Article 71, para 1 CISA).

Leverage is permitted only up to a certain percentage of the fund's net assets (Article 71, para 2 CISA). Other funds for alternative investments may:

• raise loans for an amount equal to a maximum of 50% of the net assets (Article 100, para 1, lit a CISO);
• pledge or cede as collateral no more than 100% of the fund's net assets (Article 100, para 1, lit b CISO);
• commit to an overall exposure of up to 600% of the fund's net assets (Article 100, para 1, lit c CISO); and
• engage in short-selling (Article 100, para 1, lit d CISO).

Reference must be made in the fund name and in fund documentation and advertising material to the special risks involved in alternative investments (Article 71, para 3 CISA).

Finally, FINMA may allow such funds investing directly to use a prime brokers instead of a Swiss custodian bank for settlement services (Article 71, para 5 CISA).

Closed-Ended Funds

Closed-ended CIS take the form of either a Swiss limited partnership for collective investments (LPCI) or an investment company with fixed capital (SICAF) (Article 9, para 1 CISA).

Swiss limited partnership

The LPCI is the Swiss equivalent of the limited partnership under Anglo-Saxon law (CISA Message, FF 2005 6019 f), and was designed primarily as a private equity investment vehicle (Article 103, para 1 CISA). However, the LPCI may be used to make other investments (Article 103, para 2 CISA), including alternative investments, real estate, and construction and infrastructure projects (Article 121 CISA). It is therefore a potentially adequate structure for a Swiss AIF.

The LPCI is established on the basis of the limited partnership referred to in Article 594 et seq of the CO and is supplemented by the special provisions of CISA (Article 99 CISA). It is a partnership without legal personality, which may nevertheless, under its corporate name, acquire rights and commit itself, sue and be sued (Article 99 CISA cum Article 602 CO), which gives it quasi-personality. The LPCI must secure double prior authorisation from FINMA, both as a subject (Article 13, para 2, lit c CISA) and as a product (Article 15, para 1, lit c CISA).

As an LPCI is a closed-ended CIS, investors have no direct or indirect right to the redemption of their units at the net asset value charged to the collective assets. This is justified by the investments that LPCI are required to make – ie, in principle highly illiquid investments. Introducing an unconditional redemption right for investors, as is the case for contractual investment funds and SICAVs, would jeopardise the long-term future of the LPCI and would be completely at odds with its investment objectives. A maximum term is typically for the partnership agreement (Article 102, para 1, lit e LPCC), to avoid having investors indefinitely locked into the vehicle.

An LPCI involves three parties: the promoter, the partner with unlimited liability and the limited partners.

• The promoter of the LPCI is the shareholder (direct or indirect) of the limited company (société anonyme; Aktiengesellschaft) acting as a partner with unlimited liability. They will generally invest alongside the investors (Article 119, para 3 CISO).
• The unlimited partner (also named “partner with unlimited liability” or “general partner”) must be incorporated as a limited company (société anonyme; Aktiengesellschaft) under Swiss law (Article 98, para 2 CISA) and have paid-up share capital of at least CHF100,000 (Article 118, para 2 CISO). The unlimited partner is responsible for the management of the LPCI (Article 599 CO) and represents it in dealings with third parties.
• Limited partners are the investors in the LPCI. They play a passive role in the LPCI and are only liable up to a certain amount, known as the “commandite” (Article 98, para 1, phr LPCC and Article 608, para 1 CO). Given the significant risks and financial commitments inherent in investments in hedge funds and private equity, limited partners must be qualified investors within the meaning of Article 10, para 3 or 3ter of CISA (Article 98, para 3 CISA), which in turn refers to Article 4, paras 3 to 5 and Article 5, paras 1 and 4 of FinSA.

Unlike contractual investment funds and SICAVs, LPCIs are not required to engage a custodian bank due to the nature of their investments. However, an LPCI may utilise custody and payment services if the partnership agreement explicitly so provides (Article 102, para 1, lit j CISA).

The economic rights conferred by an LPCI unit are set out in the partnership agreement. However, investors in an LPCI are not limited to property rights alone. They may – and often will – have certain pecuniary obligations stipulated in the partnership agreement. These obligations may include making additional investments (capital contribution obligations) or repaying a portion of the profits in predefined circumstances (claw-backs).

The participation rights of the limited partner are limited. The limited partner does not have the right to manage the company's affairs (Article 600, para 1 CO). Moreover, they have no means of objecting to management actions that fall within the scope of the company's ordinary operations (Article 600, para 2 CO) and have only very limited rights of information and control (Article 601, para 3 CO and Article 106 CISA).

SICAF

The SICAF is a non-listed Swiss limited company within the meaning of Article 620 et seq of the CO. Its shareholders are not necessarily qualified shareholders and its sole purpose is collective investment (Article 110, para 1 CISA). The SICAF is essentially governed by the provisions relating to public limited companies (Article 112 LPCC). A share in a SICAF must be fully paid-up (Article 113, para 1 CISA).

The SICAF is authorised to make investments that:

• have only limited access to the market;
• are subject to significant price fluctuations;
• involve limited risk spreading; or
• are difficult to value (Article 69, para 2 CISA cum Article 115, para 2 CISA).

Like SICAVs, SICAFs must obtain both prior authorisation as a subject (Article 13, para 2, lit d CISA) and prior approval as a product (Article 15, para 1, lit d CISA) from FINMA.

To date, the SICAF has remained no more than a theoretical vehicle that has fallen out of favour with fund promoters, mainly for tax reasons and because of the burden of its regulatory regime.

L-QIF

Created on the basis of the Restricted Alternative Investment Funds (RAIFs) that have recently developed extensively in Luxembourg, the Limited Qualified Investor Fund (L-QIF) is a CIS that is:

• exclusively reserved for qualified investors;
• administered by certain Swiss regulated entities; and
• not subject to authorisation, approval or supervision by FINMA.

The L-QIF may be an open or closed-ended CIS. It is not a new legal form of CIS, since it can only take the form of some existing Swiss CIS – ie, a contractual investment fund, a SICAV or an LPCI (Article 118c CISA). The form of a SICAF is excluded.

In principle, the provisions of CISA apply to L-QIFs, with a number of important exceptions, including provisions governing the obligation to obtain authorisation or approval from FINMA and the obligation to be subject to FINMA supervision. L-QIFs are also not subject to the obligation to publish a prospectus.

The absence of FINMA supervision is compensated above all by the auditing of the L-QIF by an auditing company approved by FINMA on the one hand, and by the special requirements imposed on the administration of the L-QIF, which will have to be carried out by specific institutions subject to FINMA supervision (indirect supervision), on the other. In general, an L-QIF is managed by a fund management company but, depending on the type of L-QIF and legal requirements, management and investment decisions can be (sub)delegated to other regulated entities (such as a manager of collective assets or a foreign manager of collective assets).

L-QIFs benefit from a high degree of freedom in terms of investment regulations, risk diversification and permitted investments (Article 118d CISA). Such freedom enables L-QIFs to proceed to traditional investments as well as alternative ones. If an L-QIF invests in alternative investments, reference must be made to the particular risks associated with these investments in the designation, in the relevant documents (fund contract, the investment regulations or the partnership agreement) and in the advertising material. In the case of L-QIFs in the legal form of a contractual fund or SICAV, the risk notice must take the form of a warning clause that briefly and concisely describes the main risks associated with the potential investments. The warning clause must be included on the first page of the fund contract or the investment regulations and in the advertising documents.

Investment Companies Not Governed by CISA

Article 2, para 3 of CISA provides for some exceptions whereby an investment company is not governed by CISA, and in particular is not considered as a SICAF.

The first exception is an investment company in the form of a Swiss limited company (société anonyme; Aktiengesellschaft), the shares of which are listed on a Swiss exchange.

The second exception requires the fulfilment of two cumulative conditions:

• only qualified investors are shareholders of the investment company and are entitled to participate in the company; and
• the shares of the investment are registered shares.

The notion of qualified investors is important for investment companies in order to determine whether the second exception above can apply. This notion is introduced in CISA and is specifically defined by Article 10, paras 3 and 3ter to encompass four types of qualified investors:

• professional clients pursuant to Article 4, para 3 and 5 of FinSA;
• institutional clients pursuant to Article 4, para 4 of FinSA;
• retail clients who opted out in accordance with Article 5, paras 1 and 2 of FinSA; and
• retail clients with an asset management or investment advice agreement (Article 10, para 3ter CISA).

In addition, Article 2, para 2, lit a–g of CISA provide for seven types of entities that are not governed by CISA.

This is particularly the case for operating companies that are engaged in entrepreneurial activities pursuant to Article 2, para 2, lit d of CISA. For the purpose of applying CISA and irrespective of their legal status, such operating companies meet the following requirements:

• they have either their registered office as defined by their articles of association or their actual registered office in Switzerland, or are established in Switzerland if their registered office as defined by their articles of association is located in another state;
• they pursue their activities on a commercial basis or on a scale that requires commercially organised business operations; and
• their main purpose is the management of a services, production or trading business (Article 1b, para 1 CISO).

In particular, operating companies are companies that:

• develop or construct real estate;
• produce, buy, sell or exchange goods and commodities; or
• offer other services outside the financial sector (Article1b, para 2 CISO).

Another noteworthy exception is investment clubs whose members are in a position to manage their financial interests themselves (Article 2, para 2, lit f CISA). Such clubs, irrespective of their legal status, must meet four requirements:

• the membership rights are set out in the relevant constitutive document for its chosen legal status;
• the members or a section of the members take the investment decisions;
• the members are informed about the status of the investments on a regular basis; and
• the number of members does not exceed 20.

The use of this type of structure must be carefully evaluated, as it is not intended to serve as a business model.

Generally speaking, Swiss CIS require authorisation from FINMA (Article 13, para 1 and Article 15, para 1 CISA). Exceptions are collective investments structured as L-QIFs (which must, however, be administered by certain institutions authorised by FINMA), and investment companies not subject to CISA.

Entities providing management and administration services to Swiss CIS also require FINMA authorisation – ie, collective investment managers and fund management companies (Article 5, para 1 FinIA).

Please see 2.3.4 Regulatory Approval Process regarding the length of the process.

In addition to the regulator’s fees, auditors’ fees shall be taken into account as part of the CIS’ set-up expenses.

Contractual Investment Funds

Contractual investment funds are established by an investment fund contract involving the investors, the fund management company and the custodian bank. Both the fund management company and the custodian bank must be authorised by FINMA (Article 5, para 1 FinIA and Article 13, para 2, lit e CISA).

Under the investment fund contract, the fund management company undertakes to ensure that the investors participate in the investments in proportion to their assets, and to manage the funds’ assets in accordance with the fund contract at its own discretion and for its own account (Article 25, para 1 CISA). The investment fund contract must be submitted to FINMA for approval (Article 15, para 1, lit a CISA).

The FINMA fees associated with the decision on the approval of the investment fund contract are set between CHF1,000 and CHF10,000.

SICAVs and SICAFs

The establishment of SICAVs and SICAFs is primarily governed by the company law provisions outlined in the CO. However, exceptions apply to the rules on contributions in kind, acquisitions in kind and special privileges, which are specifically governed by CISA (Article 37, para 1). Their establishment requires an act of incorporation in the form of a public deed (Article 629, para 1 CO).

SICAVs and SICAFs must be authorised by FINMA as institutions (Article 13, para 2, lit b and d CISA) and submit their constituting documents (ie, articles of association and investment regulations) to FINMA for approval (Article 15, para 1, lit b and d CISA).

In the case of a SICAV requiring authorisation as an umbrella fund consisting of multiple sub-funds, each sub-fund must be approved individually (Article 15, para 2 CISA).

Advance approval from FINMA is also required for any product-related changes that involve amendments to the investment regulations (Article 16 CISA and Article 14 f CISO).

The FINMA fees for obtaining authorisation as a SICAV or a SICAF range from CHF4,000 to CHF30,000. Fees for the approval of the articles of association and investment regulations are set between CHF1,000 and CHF10,000.

Swiss Limited Partnership (LPCI)

The establishment of LPCIs primarily follows the company law provisions governing ordinary limited partnerships under the CO (Article 99 CISA). The general partner must be a limited company (société anonyme; Aktiengesellschaft) with its registered office in Switzerland. General partners without authorisation as managers of collective assets may only be active as a general partner in one LPCI.

LPCIs must be authorised by FINMA as an institution (Article 13, para 2, lit c CISA) and must submit their constituting documents (ie, the partnership agreement) to FINMA for approval (Article 15, para 1, lit c CISA). Advance approval from FINMA must also be obtained for all product and licence-related changes to the basis on which authorisation was originally granted (Article 16 CISA and Article 14 f CISO).

The FINMA fees for obtaining authorisation as an LPCI range from CHF4,000 to CHF30,000. The fees for approving the partnership agreement are set between CHF1,000 and CHF10,000.

Investors in open-ended funds are only liable up to the amount of their initial investment (see in particular Article 36, para 1, lit c CISA). For contractual investment funds and SICAVs structured as umbrella funds with multiple sub-funds, each sub-fund’s liability is restricted to its own obligations, and investors in one sub-fund cannot be held liable for the liabilities of other sub-funds (Article 93, para 2 CISA).

Similar to investors in SICAVs, the liability of investors in SICAFs is legally limited to their capital contributions.

In the case of a closed-ended LPCI, the unlimited partner bears unlimited liability, while the limited partners are liable only up to their contribution (Article 98, para 1 CISA). Investors in an LPCI may – and very often will – have certain pecuniary obligations set out in the partnership agreement. These include the obligation to make additional investments (capital contribution obligation) or the obligation to repay a share of the profits in predefined cases (claw-backs).

Duty to Publish a Prospectus

Rules pertaining to product documentation are essentially governed by FinSA and FinSO.

Fund management companies of contractual investment funds, SICAVs, LPCIs and SICAFs must issue and publish a prospectus when offering to the public (Article 48, para 1 FinSA).

The prospectus of contractual investment funds, SICAVs and SICAFs shall be submitted to FINMA (Article 48, para 4 FinSA) and must provide detailed information about the funds’ establishment, legal structure and operational framework (such as information about its duration, tax provisions, accounting year and the name of its audit company). In addition, the prospectus must outline the investment strategy, permitted investments and investment restrictions. It must disclose information about compensation, costs and fees and the accessibility to relevant documents such as fund contracts and reports. It is also mandatory to include information on the licensee, custodian bank and third-party providers, as well as the historical performance of the fund (see Annex 6 of FinSO).

LPCI prospectuses must contain the information in the partnership agreement on investments, investment policy, investment restrictions, risk diversification, risks associated with investment and investment techniques (Article 49, para 2 FinSA).

L-QIFs are not required to produce a prospectus (Article 50, para 1 FinSA).

Duty to publish a Key Information Document (KID)

Funds that are offered to retail investors outside the scope of a portfolio management agreement must issue a KID (Article 58, para 1 FinSA). This basic information sheet must contain all the information essential for investors to make a well-founded investment decision and a comparison of different financial instruments (Article 60, para 1 FinSA).

Foreign AIFs

Foreign AIFs offered in Switzerland to non-qualified investors, high net worth retail clients and private investment structures created for them that have opted out of being treated as professional clients must include information on the Swiss representative and paying agent in their prospectus (Article 133, para 2 CISO). It shall also include information on the location where the prospectus, the KID, the constituting documents of the funds, and the last annual and semi-annual reports may be obtained (Article 133, para 2 CISO).

Reporting Requirements

Open-ended funds and LPCIs are required to publish an annual report within four months of the close of the financial year, providing the following information in particular (Article 89, para 1 and Article 108 CISA):

• the annual accounts consisting notably of a statement of net assets or the balance sheet and the profit and loss account;
• the number of units redeemed and newly issued during the financial year;
• the inventory of the fund’s assets;
• the valuation principles;
• a breakdown of the buy and sell transactions;
• the names of persons and companies to which duties have been entrusted; and
• other information relating to matters of particular economic or legal significance, such as amendments to funds regulations, a change of fund management company or custodian bank and legal disputes.

SICAFs are also required to publish a similar annual report, but with limited information tailored to this type of fund (Articles 89 and 117 CISA).

Open-ended funds and closed-ended funds must also publish a semi-annual report, which shall be issued within two months after the end of the first half of the financial year (Article 89, para 3 and Articles 108 and 117 CISA). This report notably contains an unaudited financial statement, information on units issued and redeemed during that period, the inventory of the fund’s assets and a breakdown of the buy and sell transactions.

Similar reporting requirements apply to foreign AIFs (Article 133, para 2, lit d CISO).

Swiss CIS, including Swiss AIFs, are strongly focused on local investors, mainly because they do not benefit from a European regulatory “passport” for distribution in the European Union.

According to the Asset Management Study 2024 published by AMAS, pension funds represent the largest client segment. Other common types of investors in AIFs in Switzerland include institutional investors such as insurance companies, private banks and other financial intermediaries, which often invest on behalf of their clients both in Switzerland and abroad. High net worth individuals and their family offices also represent a significant portion of investors in Switzerland, investing either directly or through financial intermediaries.

Swiss regulations limit access to AIFs for retail investors, as these products are predominantly reserved for qualified investors.

Please see 2.1.1 Fund Structures for detailed information on Swiss legal structures used by fund managers.

In theory, open-ended funds and SICAFs are open to all investors (Article 10, para 2 CISA). In practice, many open-ended AIFs focus exclusively on qualified investors, particularly when seeking exemptions from specific provisions of CISA from FINMA (see notably Article 10, para 5 CISA).

Only qualified investors are permitted to invest in LPCIs and L-QIFs (Article 98, para 3 and Article 118a, para 1, lit a CISA).

CISA distinguishes between qualified and non-qualified investors (also referred to as retail clients). The following investors are deemed to be qualified investors (Article 10, para 3 and 3ter CISA):

• supervised financial intermediaries, which include in particular banks, central banks, securities firms, fund management companies, managers of collective assets, portfolio managers, CIS and foreign financial intermediaries subject to similar prudential supervision;
• supervised insurance companies and foreign insurance companies subject to similar prudential supervision;
• public entities, institutions and foundations with professional treasury operations, occupational pension schemes with professional treasury operations, companies with professional treasury operations, large companies and private investment structures with professional treasury operations created for high net worth retail clients;
• high net worth retail clients and their private investment structures that have opted to be treated as professional clients under FinSA; and
• retail clients to whom a financial intermediary provides portfolio management or investment advice in accordance with FinSA within the scope of a permanent portfolio management or investment advisory relationship.

Clients that are not listed as qualified investors are considered to be non-qualified investors.

Regarding open-ended funds, the investment limitations of AIFs depend on the classification of the funds.

“Other funds for alternative investments” offer the broadest range of investments and strategies. Such funds are permitted to invest notably in securities, precious metals, real estate, commodities, derivatives, units of other collective investment schemes, money market instruments and sight and time deposits with a term of up to 12 months (Article 69 CISA and Article 99 CISO). They may carry out investments that:

• have only limited marketability;
• are subject to strong price fluctuations;
• exhibit limited risk diversification; and
• are difficult to value (Article 69, para 2 CISA).

Such funds are characterised by investments, structure, investment techniques (short-selling, borrowing of funds, etc) and investment restrictions that exhibit a risk profile that is typical for alternative investments (Article 71, para 1 CISA).

LPCIs can invest in risk capital, construction, real estate, infrastructure projects, alternative investments, other investments and a mixed form of those investments (Articles 120 and 121 CISO).

SICAFs may invest in the same asset classes authorised for other funds for alternative investments (Article 115, para 2 CISA).

For other types of funds, please see 3.3.1 Regulatory Regime.

Fund management companies, SICAVs, LPCIs, SICAFs and managers of collective assets of Swiss AIFs must apply for authorisation with FINMA and are subject to its prudential supervision (Article 5, para 1 FinIA and Article 13, para 2 CISA). Only Swiss banks authorised by FINMA can act as custodian bank of a Swiss AIF (Article 72, para 1 CISA).

Swiss AIFs shall have their head office and effective place of management in Switzerland. Tasks may be delegated solely to third parties that possess the necessary skills, knowledge and experience, and that have the required authorisations (Article 14, para 1 FinIA). FINMA may subject the delegation of investment decisions to an asset manager located abroad to an agreement on co-operation and information exchange between FINMA and the competent foreign supervisory authority, particularly if such an agreement is required under the other country’s legislation (Article 14, para 2 FinIA).

As Swiss AIFs must have their head office and effective place of management in Switzerland (see 2.3.2 Requirements for Non-Local Service Providers), non-Swiss domiciled managers cannot manage AIFs domiciled in Switzerland.

Please see 2.3.2 Requirements for Non-Local Service Providers regarding the delegation of investment decisions.

The authorisation and approval process generally involves a preliminary discussion with FINMA, followed by a formal application. FINMA aims to grant approval within two months from the date it receives a complete filing (see notably Article 17 CISO). The duration of the process depends on the complexity of the fund, its investment strategy and the investors targeted. In practice, however, the regulatory approval process may take longer, often exceeding six months.

If the pre-marketing activity is aimed at acquisition or disposal, or takes the form of the provision of personal recommendations on transactions relating to units in AIFs, it triggers the application of the requirements set forth under FinSA (see 2.3.6 Rules Concerning Marketing of Alternative Funds).

Swiss AIFs

The marketing of Swiss AIFs in Switzerland is regulated by FinSA and its implementing ordinance. Marketing of AIFs to investors in Switzerland does not require a FINMA licence but may be considered as a financial service under FinSA. As a result, it may trigger Swiss regulations on financial service provision, which include:

• rules of conduct at the point of sale (eg, duty to inform, assessment of appropriateness and suitability of financial services, documentation and accountability);
• organisational requirements; and
• for financial service providers targeting non-qualified investors, an affiliation with an ombudsman’s office.

In addition, client advisers of Swiss financial service providers not subject to supervision, as well as client advisers of foreign financial service providers, may carry out their activity in Switzerland only if they are entered in a register of advisers (Article 28, para 1 FinSO). Prudentially supervised client advisers of foreign financial service providers are exempt from the registration requirement if they provide their services only to qualified investors (Article 28 FinSA and Article 31 FinSO).

Furthermore, offering fund units to the public triggers the obligation to publish a prospectus (see 2.1.4 Disclosure Requirements).

Foreign AIFs

Foreign CIS, including foreign AIFs, must be approved by FINMA before they can be offered to non-qualified investors in Switzerland (Article 120, para 1 CISA), although their number is very limited in practice. Accordingly, foreign AIFs may be offered to qualified investors in Switzerland without regulatory approval or authorisation. If foreign AIFs are offered to non-qualified investors and/or qualified investors that are high net worth retail clients (including the private investment structures created for them), a Swiss representative and paying agent must be appointed (Article 120, para 4 CISA).

In addition, the marketing of foreign AIFs must comply with the requirements applicable to the marketing of Swiss AIFs.

Please see 2.2.3 Restrictions on Investors for a detailed overview of the categories of investors to which AIFs can be marketed in Switzerland.

No authorisation or notification is required by FINMA prior to the marketing of Swiss AIFs. However, foreign AIFs must be approved by FINMA before they can be offered to non-qualified investors in Switzerland (Article 120, para 1 CISA).

There are no post-marketing ongoing requirements for financial services providers that have marketed an AIF in Switzerland.

For foreign CIS, please see 2.3.6 Rules Concerning Marketing of Alternative Funds regarding the duty to appoint a Swiss representative and paying agent.

In Switzerland, investor protection provisions are an integral part of the regulatory framework for AIFs. Specific restrictions apply to ensure that certain categories of investors are specifically safeguarded. In practice, Swiss and foreign AIFs are generally only available to qualified investors. Non-qualified investors are typically restricted from investing in AIFs, in order to minimise exposure to high-risk investment products.

Swiss law imposes additional requirements when a fund is authorised for offering to non-qualified investors, such as the obligation to issue a KID or, for foreign AIFs, the requirement to be approved by FINMA (Article 120, para 1 CISA). In addition, foreign AIFs that are offered to non-qualified investors and/or qualified investors that are high net worth retail clients (including the private investment structures created for them) must appoint a Swiss representative and paying agent (Article 120, para 4 CISA).

In Switzerland, FINMA adopts a co-operative approach to regulation. In particular, FINMA requires all supervised persons and entities to fully co-operate by providing any information and documents necessary for FINMA to effectively perform its regulatory duties (Article 29, para 1 of the Financial Market Supervision Act of 22 June 2007 (FINMASA)). Supervised persons and entities must also report to FINMA any incident that is of substantial importance to the supervision (Article29, para 2 FINMASA). The authority is also open to discussing regulatory issues on an informal basis and issuing rulings to provide clarity and guidance on regulatory matters.

Retail funds are structured as open-ended CIS and may be established as either a contractual investment fund or SICAV. Based on their investment policy, these funds are classified as securities funds, real estate funds or other funds for traditional investments.

While SICAFs are permitted for retail funds, no such vehicles have been registered in Switzerland since the introduction of CISA in 2007.

The LPCI and L-QIF are not available to retail investors (Article 98, para 3 and Article 118a, para 1, lit a CISA).

For further information on the fund structures available in Switzerland, please see 2.1.1 Fund Structures.

Please see 2.1.2 Common Process for Setting Up Investment Funds for details on the process involved in setting up open-ended CIS and SICAFs, which are available to retail investors.

Investors in open-ended funds are liable only up to the amount of their investment (see in particular Article 36, para 1, lit c CISA). For contractual investment funds and SICAVs structured as umbrella funds with multiple sub-funds, each sub-fund’s liability is restricted to its own obligations, and investors in one sub-fund cannot be held liable for the liabilities of other sub-funds (Article 93, para 2 CISA).

Similar to investors in SICAVs, the liability of investors in SICAFs is legally limited to their capital contributions.

Please see 2.1.4 Disclosure Requirements, which applies to both AIF and retails funds.

As Swiss CIS do not benefit from a European regulatory “passport” for distribution in the European Union, Swiss retail funds typically target Swiss domiciled non-qualified investors.

Please see 3.1.1 Fund Structures for detailed information on the Swiss legal structures used by retail fund managers.

Approved Swiss retail open-ended CIS, approved SICAFs and approved foreign CIS can be marketed to any type of investor, including non-qualified investors.

Investment limitations depend on the classification of the open-ended funds (securities funds, real estate funds or other funds for traditional investments).

Securities funds may invest their assets in securities, derivative financial instruments, units in collective investment schemes, money market instruments, sight or time deposits with a term to maturity not exceeding 12 months and other investments, provided that it does not exceed 10% of the fund’s total assets (Article 54 CISA and Article 70 CISO). However, investment in precious metals, precious metal certificates, commodities or commodity certificates is prohibited, and short selling is not permitted (Art 70, para 2 CISO).

Real estate funds may invest in residential buildings, properties that are used exclusively or mainly for commercial purposes, mixed-use buildings used for residential as well as commercial purposes, condominiums, building land (including properties for demolition), buildings under construction and leasehold land (Article 59 CISA and Article 56 CISO). Other investments are also permitted, such as mortgage notes or other contractual charges on property, participations in claims against real estate companies, units in other real estate funds, and foreign real estate securities (Article 86, para 3 CISO).

Other funds for traditional investments provide a broader range of investments and strategies. Such funds are notably permitted to invest in securities, precious metals, real estate, commodities, derivatives, units of other collective investment schemes, money market instruments and sight and time deposits with a term of up to 12 months (Article 69 CISA and Article 99 CISO). They may carry out investments that have only limited marketability, that are subject to strong price fluctuations, that exhibit limited risk diversification and that are difficult to value (Article 69, para 2 CISA). Such funds include open-ended CIS, which in terms of their investments, investment techniques and investment restrictions entail a risk profile that is typical for traditional investments (Article 70, para 1 CISA).

SICAFs may invest in the same asset classes authorised for other funds for traditional investments (Article 115, para 2 CISA).

Please see 2.3.2 Requirements for Non-Local Service Providers, which also applies to retail funds.

Please see 2.3.3 Local Regulatory Requirements for Non-Local Managers, which also applies to retail funds.

Please see 2.3.4 Regulatory Approval Process, which also applies to retail funds.

Please see 2.3.5 Rules Concerning Pre-Marketing of Alternative Funds, which also applies to retail funds.

Please see 2.3.6 Rules Concerning Marketing of Alternative Funds, which also applies to retail funds.

In theory, all Swiss CIS (except LPCIs and L-QIFs) can be marketed to all investors (qualified and non-qualified investors). In practice, Swiss CIS limit themselves to qualified investors, notably when they seek exemptions from certain provisions of CISA from FINMA (Article 10, para 5 CISA).

Foreign CIS must be approved by FINMA before they can be offered to non-qualified investors in Switzerland (Article 120, para 1 CISA).

No authorisation or notification is required by FINMA prior to the marketing of Swiss CIS. However, foreign CIS must be approved by FINMA before they can be offered to non-qualified investors in Switzerland (Article 120, para 1 CISA).

There are no post-marketing ongoing requirements for financial services providers that have marketed a CIS in Switzerland.

For foreign CIS, please see 2.3.6 Rules Concerning Marketing of Alternative Funds regarding the duty to appoint a Swiss representative and paying agent.

Please 2.3.10 Investor Protection Rules, which also applies to retail funds.

Please see 2.3.11 Approach of the Regulator, which also applies to retail funds.