Switzerland: Fund of Hedge Funds Assets Double that of Single-Manager Hedge Funds - May 2014

by Sasha Pickup

  • 13 May 2014
  • HF

Switzerland has previously been a very important location for hedge fund managers as a result of its favourable tax and regulatory environment. According to Preqin’s Hedge Fund Analyst online service, there are 210 hedge fund and fund of hedge funds managers located in Switzerland with combined assets under management of just over $100bn. Interestingly, assets under management for fund of hedge funds managers in Switzerland is more than double that of their single-manager counterparts. According to Preqin data, single-manager hedge funds based in Switzerland have around $34.1bn of assets under management, while fund of hedge funds managers account for $69.1bn. This suggests that the fund of hedge funds industry is a well-established area of the hedge fund industry in Switzerland, while the single-manager industry is a growing sector. 

Despite the large variance in assets under management between single-manager funds and funds of hedge funds, it appears that there have been substantially more single-manager fund launches since 2012. According to Preqin data, there have been 61 single-manager fund launches in Switzerland since 2012, compared to 37 fund of hedge funds launches. This indicates that single-manager funds are becoming more prominent throughout Switzerland and it may be reasonable to assume that the amount of capital invested in single-manager structures will increase, if the current trend continues. One of the largest hedge fund launches in 2013, Argentière Master Fund, was established by Zug-based Argentière Capital. 

It is also notable that the overall number of fund launches annually has decreased between 2010 and 2013. During 2010 there were 44 new funds launched in Switzerland, while in 2013 this figure almost halved to just 23 new fund launches. The new regulations introduced upon Switzerland’s hedge fund industry may be the driving force behind the reduction in new fund launches, especially in a country where the hedge fund industry has previously had less regulatory demands. 

Managed futures/CTA strategies with a systematic trading methodology are the most commonly employed strategies among single-manager fund managers based in Switzerland, with approximately 28% of all single-manager funds using a managed futures/CTA approach. However, this differs significantly among funds of hedge funds, with only 8% adopting this as a core strategy. Over 40% of funds of hedge funds based in Switzerland employ a core diversified strategy, as they seek to allocate to a range of different hedge fund strategies. 

Ultimately, Switzerland is quite unique in the contrast between the amount of assets managed in funds of hedge funds and single-manager hedge funds, and this is indicative of Switzerland’s long-established fund of hedge funds industry. It will be interesting to see what will happen to the amount of capital invested in funds of hedge funds in the future as a result of changes in investor appetites and the increased oversight from the CISA regulation.

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