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In 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 a� ected 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 quali� ed 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 submi� ed 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 bene� t from the de min-imis rule, which is quite similar to the one prescribed by

the AIFMD, asset managers of funds must have � led 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 o� ence (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: � e requirement to have both a representative and a paying agent enters into force on 1 March 2015. � ere-a� er, it will also become a criminal o� ence to market an investment fund in Switzerland lacking inter alia, a repre-sentative and paying agent in Switzerland. In this regard, newly dra� ed 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.

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Swiss Funds and Asset Managers Association (SFAMA) must also be in place. Under speci� c 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 o� er a one-stop service to funds they want to remain marketed in Switzerland by � l-ing a request to become admi� ed 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 o� er 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. � erefore, 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 � nd the space a� ractive.

2014 showed that investors lost con� dence in traditional long-only investment, as the equity markets were at all-time highs and bond yields at their lowest. � e solution to this dilemma was that several � rms 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 con� dence.

HFM: � e sophistication of investors is a reality in all hedge fund jurisdictions. To what degree is it visible in Switzerland speci� cally? 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. � is means it will get harder and harder for emerging managers to comply with the extensive requirements of institutional inves-tors and more in� ows will go to the regulated and well-established funds.

HFM: What can investment managers expect from SE-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 o� ering a one-stop-shop to talented fund managers.

SEQUOIA Asset Management SA o� ers 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 bene� t from risk management and portfolio monitoring, top down and bo� om up research, o� ce space, marketing and fund representation and distribution.

We are looking to � nd the best pilot and make sure that he or she has the best plane and operational sta� to experience the best possible � ight.

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 o� ering? 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 clari� cation 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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