On 31 January 2024, the Federal Council decided to enact on 1 March 2024 the amendments to the Collective Investment Schemes Act and the Ordinance on Collective Investment Schemes that create the basis for the new Limited Qualified Investor Fund (L-QIF). This new structure will allow licensed fund management companies and managers of collective investments to set up a fund for qualified investors without seeking the prior approval of FINMA. In addition to this important development in the regulatory landscape, the Federal Council also enacted new rules on ETFs, liquidity management and side-pockets.
1 INTRODUCTION
The Limited Qualified Investor Fund ("L-QIF") is a new regime for collective investment schemes, which allows a fund management company or a manager of collective investments to set up a collective investment scheme that is open only to qualified investors. It is inspired by the Reserved Alternative Investment Fund ("RAIF") under Luxembourg law1.
This regime was introduced by the amendments to the Federal Act on Collective Investment Schemes of 23 June 2006 (SR 951.31; "CISA") of 17 December 2021. After a long wait, the Federal Council on 31 January 2024 revised the Ordinance on Collective Investment Schemes of 22 November 2006 (SR 951.311; "CISO") and set the entry in force for these revisions for 1 March 2024.
The revision of the CISO also provided an opportunity to amend or include other provisions not related to the L-QIF to comply with international standards, follow market developments or to increase legal certainty.
2 OVERVIEW
2.1 Legal forms
The L-QIF is a collective investment scheme open exclusively to qualified investors. The LQIF is not a new legal form, but rather builds on the existing types of collective investment schemes and can, therefore, be structured as:
- a contractual investment fund,
- a SICAV, or
- a limited partnership for collective investments (article 118c CISA).
By contrast, it will not be possible to set up an investment company with a fixed capital (SICAF) as an L-QIF (article 118c CISA). This restriction has no practical consequence as investment companies that are open exclusively to qualified investors continue to remain out of scope of the CISA (article 2 (3)(a) CISA) and, accordingly, the applicable regime remains more flexible than the L-QIF.
2.2 Qualified Investors
The main defining feature of an L-QIF is that it is open only to "qualified investors" (article 118a (1)(a) CISA). This term includes professional clients, institutional clients under article 4 (3) and (4) and 5 (1) and (4) of the Federal Act on Financial Services of 15 June 2018 (SR 950.1; "FinSA"), including, in principle, high-net-worth individuals and their private investment structures who declare that they wish to be treated as professional clients (article 5 (1) FinSA).
In addition, retail clients are deemed to be qualified investors if they receive portfolio management or investment advice from a bank, a financial institution or, pursuant to the revised CISA, an insurance undertaking unless they declared that they do not wish to be treated as qualified investors (article 10 (3ter) CISA).
However, for tax reasons, L-QIFs that invest directly in real estate will only be available to per se professional clients under article 4 (3) (a)-(h) FinSA, thus excluding both HNWI who elected to be treated as professional clients and retail clients deemed to be qualified because they benefit from portfolio management or advisory services from a bank, a financial institution or an insurance company.
2.3 Change of status from a supervised investment scheme to an L-QIF
Existing collective investment schemes can change their status from a supervised vehicle to an L-QIF, with the approval – and, for SICAVs and limited partnerships for collective investments, the authorization – of FINMA (article 126c (1) CISO) provided their constitutional documents provide for this possibility.
As part of this process FINMA will in particular assess, among other things, whether the investment scheme complies with all requirements applicable to L-QIFs (article 126c (2)(a) CISO) and that all remaining investors expressly consented to the change of status (article 126c (2)(d)(1)-(3) CISO). Despite the criticism by the industry in the consultation procedure,2 the Federal Council insisted on this very stringent requirement3.
By contrast, an L-QIF will not be allowed to engage in a restructuring (e.g. a merger or demerger) with a supervised collective investment scheme and vice versa (article 126e CISO).
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Footnotes
1. Botschaft zur Änderung des Kollektivanlagengesetzes (Limited Qualified Investor Fund; L-QIF) 19 August 2020, BBl 2020 6885 ff. (cit. Botschaft KAG), p. 6886, 6890, 6896 f.
2. See for example statement of the Asset Management Association Switzerland of 23 December 2022, available at (https://www.am-switzerland.ch/de /download/lenraekgeiiktbabhcbrpppzodxrfxiwgkea) (last visited on 15 February 2024; cit. Statement AMAS), file "Tabelle AMAS final", p. 13; statement of the Swiss Insurance Association of 21 December 2022, p. 17.
3. Änderung der Kollektivanlagenverordnung (Limited Qualified Investor Fund, L-QIF), Erläuterungen of 31 January 2024, available at (https://www.newsd.admin.ch/newsd /message/attachments/85902.pdf) (last visited on 15 February 2024; cit. Erläuterungen), p. 25 f.
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