Switzerland-based hedge fund investors account for approximately 24% of all Europe-based hedge fund investors, according to Preqin’s Hedge Fund Investor Profiles online service, representing a significant source of capital for fund managers. Industry observers are keen to evaluate the impact of the Collective Investment Schemes Act (CISA) and the implications it will have on hedge fund investors in Switzerland. As a result of CISA and its alignment with the AIFMD, domestic hedge funds have come under the spotlight, with a high proportion of experienced investors seeking opportunities closer to home. The hedge fund industry continues to adapt to new rules and regulations, and as of next month, funds based outside Switzerland are expected to appoint a representative and paying agent within the country in order to distribute their fund to qualified investors. Despite the introduction of CISA, hedge fund managers continue to gain large amounts of capital from Switzerland-based investors.
Preqin’s Hedge Fund Investor Profiles online service currently tracks 240 institutional investors based in Switzerland that are actively investing in hedge funds. On average, Switzerland-based investors made their first allocation to hedge funds in 1999, compared to the rest of Europe, which made its first investment to the asset class in 2004. Moreover, Switzerland-based investors allocate capital to a higher number of hedge funds than investors based in the rest of Europe, holding on average 33 hedge funds, compared to just 18 for the rest of Europe. This can go some way to suggest that Switzerland is home to many experienced and well-established investors, perhaps more so than their European counterparts.
Fund of hedge funds managers are the largest investor type within Switzerland, accounting for 28% of the country’s investor base. Switzerland also contains a high number of wealth managers, making up 22% of investors, followed by family offices (single and multi) which represent 18%. Currently, 54% of hedge fund investors based in Switzerland have an appetite for hedge funds in Europe. These investors have also demonstrated a preference for US-based managers (30%) and emerging markets (22%).
While increased regulation throughout the region may cause concerns for the hedge fund investment environment, it appears that Switzerland-based investors will stay committed to the asset class owing to their wealth of experience and level of activity within the sector, for which they remain an important source of capital for the hedge fund industry.