Investors Look To Switzerland

Wealth management in Switzerland is evolving with investment fund solutions for private clients. Matthew Feargrieve and Jonathan Vanderkar, Partners in Appleby's Zurich office, explain why.

In addition to its primary characteristic as the jurisdiction of choice for private banking, Switzerland is growing in significance as a centre of fund management. The country boasts around 15% of global assets under management, making it the third largest global centre of asset management after North America and the United Kingdom. In this light it is perhaps not surprising that there is a growing fusion between the traditionally separate spheres of bank-led wealth management and professional fund management. The growing development of private investment funds (aka 'private label funds') by banks and family offices in Switzerland as alternative tools of wealth management are increasingly complementary to the more conventional techniques of wealth management which revolve around trust structures.

Trusts and their manifold structural variations are the established tools of wealth planning, preservation and consolidation. The trust provides the means of retaining control over asset management, ensures confidentiality of ownership, permits family advisers a degree of oversight and management of the assets, ring-fences assets from other asset classes and - perhaps most importantly - enables a bespoke, self-managed investment product delivering better value than arm's-length products offered by professional managers.

There is a downside, however. The trust is effectively an Anglo-Saxon product, not widely or truly understood in non-English speaking, civil law jurisdictions. A trust can be a highly complex creature that is not widely intelligible to clients or their professional advisers. The notion of surrendering control of assets to a third party is anathema to some clients. A trust entails the maintenance of salaried trustees, many of whom lack the legal and professional ability to carry out or oversee active management (as distinct from passive holding) of assets. And a trust is quintessentially a very private creature, not capable of wider funding or investment.

Enter the private investment fund. The realisation has dawned on banks, family offices and professional managers in Switzerland that the primary benefits conferred by the trust can be replicated, often at a lower cost and without compromising autonomy, confidentiality or tax integrity, by using a...

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