Why Switzerland needs an L-QIF

Following the expiration of the referendum period for amending the Collective Investment Schemes Act (CISA), the introduction of a limited qualified investor fund (L-QIF) will likely become a reality in Switzerland in the first half of 2023. L-QIFs are funds that are only open to qualified investors. As such, they offer fund sponsors and investment managers considerable advantages over traditional fund vehicles and are likely to boost Switzerland's attractiveness and competitiveness as a fund center.

What are the advantages of the L-QIF?

Unlike existing Swiss investment funds, the L-QIF does not require a license from the Swiss Financial Market Supervisory Authority (FINMA). This speeds up the entire launch process and promises to shorten the time-to-market for new investment ideas. New funds as well as changes to existing fund products can therefore be implemented more quickly. In particular, this favors funds with a focus on alternative investments such as real estate, private equity, and private debt, where the approval process takes longer.

Furthermore, the L-QIF is not subject to any rules on possible investments or risk diversification. The only requirement is that these points are disclosed in a transparent manner in the fund contract. The result is greater flexibility when it comes to portfolio construction, such as the combination of multiple asset classes or launch of funds with a concentrated portfolio. Furthermore, the L-QIF creates additional opportunities for the Swiss launch of open-ended funds that invest in non-traditional asset classes – provided they can be readily valued and there is sufficient liquidity for redemption.

Strengthening Switzerland as a fund location

L-QIF-type funds were previously established in foreign fund domiciles. One successful example is Luxembourg's RAIF (reserved alternative investment fund), which is also recognized and valued by Swiss institutional clients. The L-QIF now provides an opportunity to build on Luxembourg's experience and comprehensively meet this investment need in Switzerland, too. It is therefore likely to make an important contribution to strengthening Switzerland's position as a fund location.

Integrating an L-QIF into portfolios

Fund sponsors and investment managers who are interested in an L-QIF and wish to incorporate it into their offering or portfolio will be supported by Credit Suisse Asset Servicing specialists throughout the fund lifecycle. This will include devising the optimum setup based on their needs. Dedicated project managers with several years' practical experience in the investment management, custodian bank, and fund administration areas will then take care of the defined structure and – as central project managers – coordinate the discussed services and requests.

Customized project planning is required for efficient, transparent implementation. As well as optimum fund structure, this includes a granular breakdown of the individual steps in the regulatory, legal, and operational process through to launch. The fund sponsor is kept informed of the achievement of milestones, as well as regularly updated on the implementation status and upcoming next steps.

Following launch, fund sponsors continue to benefit from individual, forward-looking advice and support as well as access to a broad network of internal and external fund specialists.

Seizing new opportunities with the L-QIF

Limited qualified investor funds represent a welcome addition to the current line-up of solutions and can deliver tangible benefits for sponsors of existing FINMA-supervised funds as well as for sponsors or investment managers of concentrated portfolios or portfolios with an alternative investments mix.

Accordingly, there is a strong prospect that the L-QIF – as is the case with Luxembourg's RAIF – will be a success. However, only the future will tell whether the L-QIF is also prompting Swiss fund sponsors to repatriate fund assets held in foreign structures.