Recent regulations in Europe have affected the Swiss hedge fund industry by requiring foreign alternative investment funds marketed in Switzerland to have an asset manager located in Switzerland licensed by FINMA, as well as a local representative and paying agent. These requirements, which took effect on March 1, 2015, were implemented to regulate foreign funds similarly to the EU Alternative Investment Fund Managers Directive. Looking forward, Swiss funds will need to meet stringent institutional standards to compete against large players, while foreign funds may retain Swiss representatives to maintain a presence in Switzerland.

1. 24 HFMWEEK .COM
S W I T Z E R L A N D 2 0 1 5
I
n light of increasingly tough regulations, rising
business costs and more extensive due diligence
from investors, fund managers in Switzerland need
to step up in order to compete with the big play-
ers. SEQUOIA Asset Management SA can ensure
investment managers reach a top institutional level
while focusing on what they do best: trading
HFMWeek (HFM): How have recent regulatory de-
velopments in Europe affected the Swiss hedge fund
industry?
Henri Corboz (HC): Before the amendment of the fed-
eral Collective Investment Schemes Act (CISA), which
entered into force on 1 March 2013, the management of
foreign funds in Switzerland and the marketing of funds to
Swiss qualified investors, in the absence of any public so-
licitation, were out of the scope of the CISA. Following the
trend of the EU Alternative Investment Fund Managers
Directive (AIFMD), the Federal Council submitted to the
Federal Assembly (Swiss Parliament) a bill of amendment
of the CISA in order to regulate the foreign alternative in-
vestment funds by implementing a licensing process with
regards to their asset managers, provided they are located
in the country, as well as imposing a local representative
and paying agent to such funds since they are marketed
in Switzerland.
Provided the manager may not benefit from the de min-
imis rule, which is quite similar to the one prescribed by
the AIFMD, asset managers of funds must have filed their
request for authorisation with FINMA by 28 February
2015. It is worth underlining that the asset management
activity under Swiss law shall not only remain compliant
with the laws applicable to the fund, but also with the law
of the country of incorporation of the asset manager, i.e.
Switzerland.
To some extent, a fund’s foreign law may regard this as
acceptable advisory services to the fund, which are con-
sidered asset managers of funds subject to authorisation
under Swiss Law. Out of the scope of the de minimis rule,
performing such asset management activities in Switzer-
land while not being an authorised manager of collective
investment schemes is a criminal offence (article 44 of the
Federal Act on the Swiss Financial Market Supervisory
Authority).
HFM: When will having a representative and paying
agent become compulsory?
HC: The requirement to have both a representative and
a paying agent enters into force on 1 March 2015. There-
after, it will also become a criminal offence to market an
investment fund in Switzerland lacking inter alia, a repre-
sentative and paying agent in Switzerland. In this regard,
newly drafted distribution agreements to be signed by the
fund and/or its management company, the representative
and the distributor (the entity marketing the fund in Swit-
zerland) matching the minimal requirements enacted by
CYRUS FAZEL AND HENRI CORBOZ OF SEQUOIA ASSET MANAGEMENT TALK TO HFMWEEK ABOUT THE CURRENT
REGULATORY FRAMEWORK IN SWITZERLAND
SWISS FUNDS MUST CHANGE
TO SURVIVE
Henri Corboz
is head of legal &
compliance at SEQUOIA
Asset Management. Prior
to SEQUOIA, Corboz was
in charge of the legal
department at Crédit Agricole
SA. He joined Sequoia Asset
Management SA in 2014.
He holds an LL.M from the
University of Pennsylvania
Law School, a Lic. Iur. from
the University of Geneva
Law School and the STEP
Diploma in International
Trust Management.
024-025_HFMSwitzerland_2015_Sequoia.indd 24 29/01/2015 15:50

2. A S S E T M A N A G E M E N T
HFMWEEK .COM 25
Swiss Funds and Asset Managers Association (SFAMA)
must also be in place. Under specific conditions, the for-
eign regulated manager of the investment fund may per-
form marketing activities in Switzerland based on a Swiss
law compliant distribution agreement and under the su-
pervision of the Swiss representative who has to make sure
that local provisions are followed.
All the intermediaries in the marketing process, being
the representative, the paying agent and the distributor,
are regulated entities. As FINMA authorised asset man-
agers of collective investment schemes, SEQUOIA Asset
Management SA tends also to offer a one-stop service to
funds they want to remain marketed in Switzerland by fil-
ing a request to become admitted as a representative and
distributor.
HFM: How has the Swiss hedge fund industry reacted
to FINMA?
Cyrus Fazel (CF): Switzerland remains a place open to
the promotion and marketing of hedge funds not incor-
porated within the EU, provided they match the above
requirements. With regards to the management of assets,
Swiss-based asset managers with the appropriate licence
may be in a position to perform the management of non-
EU collective investment vehicles and AIFMD or Ucits
compliant investment funds on a wide scale. Regarding
marketing, we expect that numerous non-EU hedge funds
are currently catching the opportunity to retain a Swiss
representative to keep a point of sale on the continent.
Although from time to time regarded as an isolated is-
land within the EU, we strongly believe that Swit-
zerland could offer the broadest range of products
not only available for marketing to investors, but
also locally managed.
HFM: What is the appetite for alternatives like
in Switzerland?
CF: In 2008 many institutions were invested in
hazardous funds that gated and or cheated Swiss
investors. Therefore, from 2009 till 2014 the al-
location towards hedge funds was scarce, with
the exception of few Swiss-German institutional
investors who have continued to find the space
attractive.
2014 showed that investors lost confidence in
traditional long-only investment, as the equity
markets were at all-time highs and bond yields at
their lowest. The solution to this dilemma was that
several firms started to reinvest with low correlated
hedge funds such as event-driven, market-neutral
and other non-directional strategies.
Going forward, we have strong hopes that hedge
funds will seduce investors for the following rea-
sons:
• Swiss managers will have to comply with the FINMA
standards (where risk management, legal & compli-
ance measures, and auditing are now an obligation to
carry on managing funds in Switzerland
• Foreign hedge funds will have to appoint legal rep-
resentatives and distributors, which will have to do
their own due diligence
• Ucits growth with retail classes; increase of Swiss
managers, especially in 2017 when the tax harmoni-
sation will take place.
Essentially, Swiss investors will be subjected to greater
regulated funds that have gone through due diligence,
which will help them to add a layer of confidence.
HFM: The sophistication of investors is a reality in all
hedge fund jurisdictions. To what degree is it visible in
Switzerland specifically?
CF: Prior to 2008 most people would agree that due dili-
gence was a bit light for several big institutions and the
hedge fund manager could potentially bypass it. Nowa-
days, an investor could like the fund but would need to
tick all the boxes before chipping in. This means it will
get harder and harder for emerging managers to comply
with the extensive requirements of institutional inves-
tors and more inflows will go to the regulated and well-
established funds.
HFM:WhatcaninvestmentmanagersexpectfromSE-
QUOIA and what makes you stand out?
CF:Currently we are seeking best-breed investment man-
agers in the alternative and traditional space to plug on
our platform. We are among the few Swiss asset manag-
ers approved by FINMA with the CISA licence offering a
one-stop-shop to talented fund managers.
SEQUOIA Asset Management SA offers fund manag-
ers a full range of administrative, corporate and operation-
al services which enable them to concentrate on their core
investment activities.
From legal and compliance to operations,
SEQUOIA’s range of services covers all the
tasks required for the management of invest-
ments funds within Switzerland’s new regulato-
ry environment. By joining SEQUOIA you will
benefit from risk management and portfolio
monitoring, top down and bottom up research,
office space, marketing and fund representation
and distribution.
We are looking to find the best pilot and
make sure that he or she has the best plane and
operational staff to experience the best possible
flight.
HFM: SEQUOIA, like all Swiss fund manag-
ers, must evolve to keep up with large insti-
tutional players. What are your plans to de-
velop your offering?
CF: First, we have been investing in alterna-
tive funds for nearly two decades and have
been updating our due diligence process
progressively and with upmost care. We
are fully aware of all the box ticking proce-
dures and will make sure that we are fully compliant at
every step.
In the meantime, while several Swiss asset managers
were waiting for clarification from FINMA for the CISA
licence, we were among the few who took every step to
apply for and get the CISA licence.
Fundamentally, SEQUOIA Group has been innovative
and will remain so in order to be a competitor in the race
to the top. ■
REGARDING MARKETING, WE
EXPECT THAT NUMEROUS
NON-EU HEDGE FUNDS ARE
CURRENTLY CATCHING THE
OPPORTUNITY TO RETAIN A
SWISS REPRESENTATIVE TO
KEEP A POINT OF SALE ON
THE CONTINENT
”
Cyrus Fazel, head of
marketing,has been working
in the finance industry for
eight years. He started as
portfolio advisor at Julius
Baer conducting analysis on
all asset classes for UHNW
clients. He then switched
to the asset management
industry where he worked
as a senior hedge fund
adviser at Aramis Capital SA.
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