Q&A: managing retail funds in Switzerland

Retail funds

Available vehicles

What are the main legal vehicles used to set up a retail fund? How are they formed?

Open-ended retail funds may be set up as contractual funds (FCPs) or as investment companies with variable capital (SICAVs).

FCPs are based on a tripartite fund contract between investors, the fund management company and the custodian bank. Under the fund contract, the fund management company commits itself to involving investors in accordance with the number and type of units they have acquired in the fund and to managing the fund’s assets in accordance with the provisions of the fund contract at its own discretion and for its own account. The custodian bank is a party to the contract in accordance with the tasks conferred on it by the Collective Investment Schemes Act (CISA) and by the fund contract. The fund management company draws up the fund contract and, with the consent of the custodian bank, submits it to the Swiss Financial Market Supervisory Authority (FINMA) for approval. Any amendment to the fund contract requires the consent of the custodian bank and prior FINMA approval.

SICAVs must be authorised by FINMA as institutions, and their articles of association and investment regulations require FINMA approval. A SICAV is a company whose capital and number of shares are not specified in advance, whose capital is divided into company and investor shares, for whose liabilities only the company’s assets are liable and whose sole object is collective capital investment. It is important to distinguish between self-managed SICAVs, which perform their own administration, and externally managed SICAVs, which delegate the administration to an authorised fund management company. The formation of a SICAV is largely based on the provisions of the Swiss Code of Obligations regarding the formation of companies limited by shares.

If closed-ended share companies in the form of a Swiss stock company are listed on a Swiss stock exchange, they do not fall under the CISA. However, if they are not listed on a Swiss stock exchange, they qualify as investment companies with fixed capital (SICAF) and are subject to authorisation and supervision by FINMA, unless only qualified investors participate and the shares are registered shares. Since the introduction of SICAFs in 2007, none have been authorised in Switzerland, mainly owing to the unfavourable tax treatment that leads to taxation at both the company and the investor level.

Laws and regulations

What are the key laws and other sets of rules that govern retail funds?

The investment fund business in Switzerland is governed by:

  • the Collective Investment Schemes Act (CISA);
  • the Collective Investment Schemes Ordinance (CISO);
  • the FINMA Collective Investment Schemes Ordinance (CISO-FINMA);
  • the FINMA Collective Investment Schemes Bankruptcy Ordinance (CISBO-FINMA);
  • the Financial Institutions Act (FinIA);
  • the Financial Institutions Ordinance (FinIO);
  • the FINMA Financial Institutions Ordinance (FinIO-FINMA);
  • the Financial Services Act (FinSA); and
  • the Financial Services Ordinance (FinSO).


In addition, FINMA, as the competent regulatory body and supervisory authority, has published circulars addressing specific areas of collective investment schemes law.

Market participants must also comply with self-regulation of industry organisations recognised by FINMA as a minimum standard, namely the code of conduct and various guidelines of the Asset Management Association Switzerland (AMAS, formerly Swiss Funds & Asset Management Association (SFAMA)) and the guidelines of the Swiss Bankers Association.


Must retail funds be authorised or licensed to be established or marketed in your jurisdiction?

All domestic funds require authorisation or approval by FINMA.

Furthermore, all foreign funds offered or advertised to non-qualified investors in Switzerland require FINMA approval.


Who can market retail funds? To whom can they be marketed?

Marketing of foreign and domestic retail funds does not trigger an authorisation requirement for the marketing entity but requires compliance with certain rules of conduct and organisational requirements if a particular marketing activity qualifies as a financial service under the Financial Service Act (FinSA) and is considered as performed in Switzerland.

Retail funds may be marketed to non-qualified and qualified investors.

Managers and operators

Are there any special requirements that apply to managers or operators of retail funds?

There are no special requirements for managers or operators of retail funds. The general authorisation requirements for managers and operators of funds apply. Overseas managers may be entrusted with the portfolio management of domestic retail funds on the basis of an equivalent home country authorisation and supervision, provided their licence includes managing of retail funds. 

Investment and borrowing restrictions

What are the investment and borrowing restrictions on retail funds?

The Collective Investment Act (CISA) distinguishes four types of open-ended funds based on the type of investment: securities funds, real estate funds, other funds for traditional investments and other funds for alternative investments. Each type of fund follows a different set of rules regarding permitted investments, investment restrictions and investment techniques.

Additional restrictions may be determined in the fund regulations.

 Securities funds

Securities funds may invest in transferable securities issued on a large scale and in non-securities rights with the same function (uncertified securities), and that are traded on a stock exchange or another regulated market that is open to the public, in addition to other liquid financial assets.

The following investments are permitted:

  • securities;
  • derivatives;
  • units in funds;
  • money market instruments; and
  • short-term deposits.


The following are not permitted: investments in precious metals or precious metal certificates, or commodities or commodity certificates, as well as short-selling of investments.

The following investment techniques may be employed:

  • securities lending;
  • repurchase agreements;
  • borrowing of funds of up to 10 per cent of the fund’s net assets; and
  • pledging or transferring as collateral up to 25 per cent of the fund’s net assets.

 Real estate funds

Real estate funds may invest their assets in:

  • property;
  • real estate companies;
  • units in other real estate funds and listed real estate investment companies; and
  • foreign real estate securities.


The use of derivatives is permitted for hedging purposes.

 Other funds for traditional and other funds for alternative investments

Other funds for traditional and alternative investments are open-ended funds that neither qualify as securities funds nor as real estate funds. Permitted investments for both types of funds include, in particular:

  • securities;
  • precious metals;
  • real estate;
  • commodities;
  • derivatives;
  • units of other funds; and
  • other assets and rights.


Investments may be of limited marketability, subject to strong price fluctuations, and may be difficult to value. Often these types of funds exhibit limited risk diversification.

The risk profile of these types of funds differs in terms of their investments, investment techniques and investment restrictions, in particular with regard to the following:


Other funds for traditional investments

Other funds for alternative investments


Up to 25 per cent of the fund’s net assets

Up to 50 per cent of the fund’s net assets

Pledge or transfer as collateral

Up to 60 per cent of the fund’s net assets

Up to 100 per cent of the fund’s net assets

Overall exposure

Up to 225 per cent of the fund’s net assets

Up to 600 per cent of the fund’s net assets

Engagement in short-selling




Specific investment restrictions and techniques must be laid down in the fund regulations.

The Swiss Financial Market Supervisory Authority FINMA may grant derogations from the statutory provisions in the individual case.

For SICAFs, the provisions concerning permitted investments for other funds for traditional and alternative investments apply accordingly.

Tax treatment

What is the tax treatment of retail funds? Are exemptions available?

Swiss tax law does not generally differentiate between domestic retail funds and non-retail funds. Taxation depends on the type of legal structure of the fund. The various types of domestic fund can be classified into two groups: FCPs, SICAVs and partnerships for collective investment (LPs); and SICAFs.

The first group is viewed in a transparent manner from a Swiss corporate income tax perspective. These types of funds are not subject to Swiss corporate income taxes on their income or gains. The fund’s income is taxed in the hands of the investors. An exception applies to income derived from directly owned real estate that is subject to corporate income tax at the fund level. A domestic fund holding real estate situated in Switzerland may, nevertheless, be tax exempt for the purpose of corporate income tax if its investors consist exclusively of tax-exempt pension schemes or social security institutions and compensation funds.

Profit distribution or accumulated profits from non-distributing (annual deemed distribution) FCPs, SICAVs and LPs are subject to a withholding tax at 35 per cent. If such distributions or accumulated profits derive from real estate or capital gains, no withholding tax is due, provided that they are reported separately. The withholding tax on the distribution or accumulated profits can be reclaimed by Swiss investors if they declare the income in their tax return or account for it in their financial statements.

Non-resident investors may qualify for an exemption from Swiss withholding tax under the affidavit procedure or may reclaim the withholding tax in full, if at least 80 per cent of the fund’s earnings are foreign-sourced. If foreign-sourced earnings amount to less than 80 per cent, a non-resident investor can reclaim Swiss withholding tax based on an applicable double taxation treaty between Switzerland and its country of residence.

The second group is treated identically to any other corporation in Switzerland and, therefore, is not tax transparent for any type of tax. SICAFs are subject to corporate income tax and tax on net equity, and their distributions (but not accumulated profits) to shareholders are subject to withholding tax at 35 per cent.

In principle, regarding capital and income taxes, Swiss legislation does not distinguish between investments in a domestic or a foreign fund. In both cases, investments are subject to capital tax, distributed or accumulated income is subject to income tax, while capital gains are tax-free for investors holding their assets for private investment purposes.

Asset protection

Must the portfolio of assets of a retail fund be held by a separate local custodian? What regulations are in place to protect the fund’s assets?

Fund management companies of FCPs, SICAVs and SICAFs must entrust the safekeeping of assets to a custodian bank. Custodian banks must be authorised banks according to the Swiss Banking Act and have an appropriate organisational structure to act as custodian banks for funds. Unlike depositories and paying agents, custodian banks must, in addition to their banking licence, be authorised as such by FINMA.

The role of a custodian bank includes holding fund assets on deposit, issuing and redeeming units, and handling payments processing and ensuring that the fund management company or SICAV comply with the regulations.

A custodian bank may delegate the safekeeping of fund assets to regulated third-party custodians and collective securities depositories in Switzerland or abroad, provided this is in the interest of efficient safekeeping and is appropriate. Any change of custodian bank requires prior FINMA authorisation.

If a custodian bank becomes bankrupt, the assets held by it in custody are not included in the bank’s bankruptcy estate. Instead, the assets (except cash) are segregated from the bank’s bankruptcy estate in favour of the fund management company of an FCP or of a SICAV, subject to any claims by the custodian bank against the respective depositor.

In the case of bankruptcy of a fund management company of an FCP, assets and rights belonging to the fund will be segregated in favour of the investors. Debts of the fund management company that do not arise under the fund contract may not be set off against claims of the investment fund.


What are the main governance requirements for a retail fund formed in your jurisdiction?

Any party responsible for the management of funds and the safekeeping of assets held in it must obtain authorisation from the Swiss Financial Market Supervisory Authority (FINMA). 

If there is a change in the circumstances underlying the authorisation, FINMA’s authorisation must be sought prior to the continuation of activity. The following must be reported to FINMA without delay:

  • changes to organisational and corporate documents;
  • changes in the persons responsible for the management and business operations and of significant equity holders;
  • facts that might call into question the good reputation or the guaranteeing of proper management by the persons responsible for the management and business operations (eg, criminal proceedings);
  • facts that might call into question the good reputation of significant equity holders or the prudent and sound business practice of the licensee owing to the influence of significant equity holders;
  • change of executive persons entrusted with the performance of the custodian bank’s duties; and
  • any change regarding minimum capital, capital adequacy and financial guarantees.


Persons managing, representing or safekeeping assets of funds and their agents must fulfil the following statutory conduct rules:

  • duty of loyalty: they must act independently and exclusively in the interest of the investors;
  • due diligence: they must implement organisational measures that are necessary for proper management; and
  • duty to provide information:
  • they must ensure the provision of transparent financial statements and provide appropriate information about the funds that they manage and distribute and the assets that they hold in safekeeping;
  • they must disclose all charges and fees incurred directly or indirectly by the investors and their appropriation; and
  • they must notify investors of compensation for the distribution of funds in the form of commission, brokerage fees and other soft commissions in a full, truthful and comprehensive manner.


Persons providing a financial service within the meaning of the Financial Service Act (FinSA) related to funds must comply with the rules of conduct and organisational requirements under FinSA.

The statutory conduct rules are complemented by self-regulation of industry organisations that FINMA has recognised as minimum standards, particularly the Code of Conduct of the Asset Management Association Switzerland (AMAS, formerly Swiss Funds & Asset Management Association SFAMA), as well as several guidelines.


What are the periodic reporting requirements for retail funds?

Domestic funds

Open-ended funds must keep separate accounts and publish an audited annual report within four months of the end of the fund’s financial year and an unaudited semi-annual report within two months of the end of the first half of the fund’s financial year.

The fund management company of an FCP or a SICAV must publish the prices at regular intervals in the designated publication instrument as indicated in the prospectus.

Changes to the fund regulations of FCPs, SICAVs or SICAFs must be communicated to investors by way of publication and require prior approval or authorisation by the Swiss Financial Market Supervisory Authority FINMA (FINMA). In the case of material changes, investors have a right to lodge objections. Changes to the prospectus, simplified prospectus and key investor information documents must only be notified to FINMA.

 Foreign funds

Foreign retail funds approved for offer must also publish an annual report within four months of the end of the fund’s financial year and a semi-annual report within two months of the fund’s first half of the financial year.

In addition, they must publish prices at regular intervals in the designated Swiss publication instrument as indicated in the prospectus.

Moreover, investors must be notified by way of publication about amendments to the fund documents, change of legal form, mergers, liquidations, changes of Swiss representative or paying agent and measures taken by foreign regulators, and if ‘gating’ is imposed for a foreign fund having the ability to gate. The amended fund documents require (post-effective) FINMA approval.

Proposed changes of the Swiss representative or Swiss paying agent, as well as the termination of representative agreements, require prior FINMA approval.

Issue, transfer and redemption of interests

Can the manager or operator place any restrictions on the issue, transfer and redemption of interests in retail funds?

The fund management company of an FCP or the SICAV may temporarily or fully suspend the issue of units at any time and may reject individual applications to subscribe for, or switch, units without assigning any reason therefor.

There are no statutory restrictions on the transfer of units in open-ended retail funds.

The fund regulations of open-ended retail funds, however, may further restrict the issue and transfer of units.

Investors of open-ended retail funds are, in principle, entitled to request the redemption of their units and payment of the redemption amount in cash. The fund regulations of open-ended retail funds whose value is difficult to ascertain, or that have limited marketability, however, may provide for notice to be served only on specific dates, subject to a minimum of four times per year.

The Swiss Financial Market Supervisory Authority (FINMA) may, in the event of a justified request, restrict the right to redeem at any time depending on the investments and investment policy. This can apply specifically in the case of investments that are not listed and not traded on another regulated market open to the public, mortgages and private equity investments. The right to redeem at any time may be suspended for a maximum of five years and this restriction on redemption must explicitly be disclosed in the fund regulations.

The fund regulations may provide for repayment to be deferred temporarily in certain circumstances (eg, market closures, trading restrictions or suspensions, emergencies, restrictions on asset transfers or large-scale withdrawals of units) or for a ‘gating’ procedure taking into account the interests of the remaining investors.

The auditor and FINMA must be informed immediately of any decision to defer redemptions or apply gating as well as of any lifting of such measures. Respective decision must also be communicated to the investors in a suitable manner.

The transferability of shares in SICAFs is regulated by the Swiss Code of Obligations. The SICAF’s articles of association can set out certain transfer restrictions. If there are no restrictions, the shares are freely transferable.

In the case of closed-ended retails funds, investors have neither a direct nor an indirect legal entitlement to request redemptions.