The innovative feature of the L-QIF will be its exemption from FINMA licensing, FINMA approval and FINMA supervision. As a consequence, an L-QIF can be launched within a short time. This allows the initiator the best possible time-to-market, which also significantly improves the predictability and efficiency of the fund formation.
Furthermore, the proposed regulation for the L-QIF includes liberal investment rules and does not lay down the extent of risk diversification. Certain additional duties do apply, however, if an L-QIF undertakes real estate investments. As currently proposed, the L-QIF will also be exempt from the prospectus requirement set out in the upcoming Financial Services Act (“FinSA”).
To compensate these liberalizations, certain restrictions aim to ensure adequate investor protection: the L-QIF will only be open to qualified investors as defined by the CISA, i.e. market participants who are professionally qualified, receive professional advice or do not need special protection because of their financial situation. Furthermore, the L-QIF may only be managed by a regulated fund management company or asset manager of collective assets according to the Financial Institutions Act (“FinIA”), which shall enter into force (together with the FinSA) on 1 January 2020. The lack of supervision on product level is therefore compensated to some extent by the supervision of the financial institutions involved.
Certain additional duties will ensure the necessary transparency in the market, such as the duty to disclose the special nature of the L-QIF (i.e. no FINMA licensing, approval or supervision) as well as special risks in the fund documentation and any advertisement. Finally, fund-specific audits shall also apply for the L-QIF.
In terms of legal form, the L-QIF is flexible and offers a range of different structures. The L-QIF may be launched as a contractual fund, as limited partnership for collective capital investments, or as a fund with a legal personality (in the form of a SICAV or SICAF).
In summary, the L-QIF will be the fund product of choice for fund initiators looking for a first-rate alternative to offshore funds, seeking to combine high legal freedom with the protection of Switzerland’s highly reputable financial market and its regulator, with short time-to-market and a relatively quick and cost-efficient setup.