Fund management covers all types of systems that maintain the value of an entity. It may be applied to a series of intangible assets, such as intellectual property, financial assets or even human capital and to tangible assets such as real estate. Basically, fund management is the term used to describe operating processes designed to maintain, dispose, deploy and upgrade assets in a cost-efficient and profitable manner.
Ultimately, in the financial world, fund management describes institutions, people and companies that manage certain assets and investments on behalf of other investors. Fund management can be classified by taking into account various factors, such as the client or investment type or according to the method used for management. The most common types of fund management companies deal with investment management of investment funds for client accounts.
Swiss fund management companies manage investment funds on behalf of investors and are responsible for most operating processes, including for choosing the best investments to make. This type of companies is required to be authorized by the Swiss Financial Market Supervisory Authority (FINMA). In addition, any changes in circumstances or the intention to cease the company’s activity must be approved by FINMA.
Authorization requirements for fund management companies
The general authorization conditions provided in the Article 14 of the Collective Investment Schemes Act are the following:
- The persons responsible with the fund management and the company’s operations have a good reputation, possess the necessary specialist qualifications and guarantee proper management of the funds.
- Significant equity holders also have a good reputation and don’t exert their influence to the detriment of prudent business practice.
- Compliance with the duties established in the CISA is ensured through internal regulation and an appropriate organizational structure.
- There are sufficient financial guarantees available.
- Additional authorization conditions listed in relevant provisions of the CISA are met.
In addition to these requirements, fund management companies must also meet the requirements established by the Articles 28 and 42 of the Collective Investment Schemes Ordinance:
- The fund management company must have the business structure of a limited company, an administrative office and a registered office in Switzerland.
- The fund company must meet the minimum capital requirements.
- There must be at least three members in the company’s board of directors.
- The share capital is divided into registered shares.
- The company’s organization must be appropriate to its role.
- The persons responsible with the company’s management must be independent of the custodian bank.
The role of fund management companies
Fund management companies manage investment funds in an autonomous manner in their own name on behalf of investors. In particular the role of fund management companies is to:
- decide on investments and their valuation and on issuing of units;
- calculate the net value of assets;
- set profit distributions and issue or redemption prices;
- exercise all rights associated with the investment funds.
Following the provisions of the Article 46 of the CISO, fund management companies also have the following rights:
- to represent foreign collective investment schemes;
- to acquire stakes in companies that have the main purpose of operating collective investment schemes;
- to manage unit accounts;
- to distribute collective investment schemes;
- to provide administrative services to collective investment schemes and similar assets, which may be investment foundations, investment companies or in-house funds.
Changes in circumstances of fund management companies
In case that any alteration is made on the basis on which the FINMA authorization was originally granted, it is necessary to acquire permission from FINMA before resuming business operations.
Approval for cessation of activity in the case of fund management companies
If there is any intention to cease fund management operations, the company must require prior approval from FINMA. In the case of cessation of activity, the regulator auditor will be asked to give their opinion on the intended action and the consequences that derive from it.
Acquire the help of our Swiss company formation experts if you are interested in opening a fund management company in Switzerland.