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Dermot Butler, Custom House Group

Offering direct access to Swiss qualified investors

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Geneva-based SwissRepCo was established in January 2014 by industry veterans Dermot Butler (pictured), former chairman of Custom House Group, a leading fund administrator, and Lancelot Frick, a fifth generation Swiss private banker and CEO and President of Frick Capital SA. ("Frick").

SwissRepCo arose in response to FINMA's decision to beef up existing fund regulations that had been brought in in 2006. In 2013, those regulations were enforced under the Collective Investment Schemes Act (`CISA') but it wasn't until 1 March 2015 that foreign hedge funds were mandated to appoint a Swiss legal representative and paying agent to continue distributing their funds to qualified unregulated investors. As Butler notes, the Swiss Representative "is the collar that FINMA can grab should something go wrong with the fund".

As such, the Swiss Representative is licensed and authorised by FINMA. As part of that arrangement it is also authorised as a distributor for the fund. 

"This doesn't mean that a manager who already has distribution partners in place is suddenly going to have to rely on the Swiss Representative as their appointed distributor. But the Swiss Representative can provide distribution support if it feels it has suitable investors for the fund to tap in to," comments Butler.

Once SwissRepCo agrees to represent the fund it automatically becomes the distributor. If a fund manager wishes to sell the fund using his own distribution network, SwissRepCo will appoint the manager as the sub-distributor and then provide the necessary overview. 

"We just check that the fund documentation being sent to Swiss investors is accurate and in compliance with CISA. The investment manager can continue selling their fund the way they always have. However, they have to be regulated in a jurisdiction with an equivalent level of regulation," explains Butler.

Newer fund managers will not necessarily have distribution capabilities in place to target Switzerland. 

Given Lancelot's heritage in private banking and the fact that he operates Frick, SwissRepCo can go further than many other Swiss Representatives by offering distribution support to managers whose investor network in Switzerland is inchoate. 

Where appropriate, it will present funds to its list of UHNW Individuals, private bankers, family offices and institutional investors and organise introductions and meetings, thus offering a clear route to market hedge funds into Switzerland in full compliance with CISA.

"If Lancelot thinks that some of his investors (in Frick) might be interested in a particular fund then he will ask the manager concerned if Frick can act as a distribution partner. In such an arrangement Frick would collect a pre-agreed commission. Otherwise, we do not charge any fees for acting as a distributor. 

"Indeed, we have relationships with independent third party marketers who sell hedge funds to the Swiss market. We can therefore introduce them to the fund managers we represent. But the vast majority of distribution will typically be done by the manager," says Butler. 

By some estimates, over 50 per cent of Europe's qualified, unregulated investor base resides in Switzerland. Strategically, it is a highly important market and Butler concludes by saying: "My advice to managers is that if they plan to sell their offshore hedge fund in Europe they are going to want to sell it in Switzerland as well."

In other words, don't risk avoiding Swiss Representation. The potential upside on offer is significant but the downside risk from non-compliance is infinite.

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