In its February session, the Swiss Federal Banking Commission gave the green light for the first two foreign funds with special risks to be sold and marketed in Switzerland.
In a milestone in the history of the Swiss funds markets, British-based ED&F Man Group (through one of its Swiss subsidiaries) was granted the right to sell and distribute its Irish investment funds AHL Alpha and AHL Diversified in Switzerland. Both funds invest in derivative products of various kinds.
The revised Act on Investment Funds distinguishes between three types of funds to which different regimes apply: security funds, real estate funds and other funds. In the case of other funds, various types of fund construction are possible, in particular funds with special risks which can invest in instruments of high leverage and gearing.
The decision reached by the Banking Commission is remarkable in two respects: not only did it permit funds with special risks for the first time, but this breakthrough was achieved with a foreign, rather than a Swiss, fund. Both funds may now be publicly sold and marketed in Switzerland.
AHL Alpha is a fund targeted at professional investors with a minimum investment of US$1 million. Nevertheless, the same restrictions and disclosure rules apply to this fund as to AHL Diversified, which is designed for the retail market (minimum investment US$30,000).
The decision of the Commission is also remarkable in another respect: for the first time, a company that is neither a bank nor an insurer has been granted permission to act as representative of a foreign investment fund in Switzerland. ED&F Man Management, the Swiss subsidiary of the ED&F Man Group that had applied for the two funds, was found to have the required good standing, professional qualification, work experience and professional insurance coverage to meet the high standards required by the Commission of prospective representatives. The company is now permitted to represent any investment fund that can be sold legally in Switzerland. Although it has been more than two years since the law permitting approval has been on the books, so far no other company has been granted permission.