L-QIF − Limited Qualified Investor Fund

L-QIFs provide an advantage over traditional Swiss collective investment schemes by offering a streamlined approval process. Unlike the conventional schemes that require FINMA’s approval, L-QIFs enable asset managers to swiftly introduce investment products that were previously absent from their offerings, thereby accelerating their market entry. In essence, the L-QIF structure serves as the Swiss equivalent to the
Reserved Alternative Investment Funds (RAIF) in Luxembourg. Faster time to market allows asset managers to attract qualified investors that seek prompt access to investment opportunities, while ensuring the necessary investor protection measures are in place. As a result, fund managers can effectively tap into the growing demand for readily accessible investment options.

L-QIFs provide a large range of options for pooling assets and offer enhanced flexibility when it comes to investment opportunities. L-QIFs provide opportunities for asset managers at two distinct levels. 

Firstly, at asset type and strategy level, L-QIFs enable a tailored investment approach and an expanded range of investment options. This flexibility enables Swiss asset managers to adapt their investment approach to the ever-changing market conditions and seize opportunities that were previously unavailable, without the need for extensive FINMA administrative procedures. With L-QIFs, investments can be allocated across a wide array of assets, encompassing both traditional and alternative assets such as hedge funds, private equity and real estate, without questioning the requalification of the fund vehicle with each change in the asset allocation mix. Secondly, L-QIFs enhance the management of the fund lifecycle by providing greater flexibility in implementing and overseeing fund events, thereby enabling a more agile approach. Within the L-QIF framework, asset managers can introduce new asset classes, adjust investment limits or modify asset exposure without the need for prior approval from FINMA. This streamlined process allows for swift decision-making and implementation, enabling asset managers to respond promptly to market trends and investor demands.

L-QIFs offer an opportunity to maintain control over launching and running costs. By offering a cost-efficient launch option, L-QIFs significantly decrease expenses associated with FINMA approval and subsequent amendments. Moreover, the different benefits of L-QIFs enhance Switzerland’s appeal as a competitive destination for fund domiciliation.

L-QIFs fall under the applicable tax regime for funds approved by FINMA. Despite being a new Swiss fund structure, L-QIFs are subject to the prevailing tax regulations that govern funds approved by FINMA, ensuring their compliance with the established tax framework.

The L-QIF is a collective investment scheme that meets the criteria set out in Article 7 of the CISA. However, unlike other Swiss funds, it does not require licensing/approval or supervision by FINMA. This innovative feature offers a significant advantage in terms of time to market, cost savings and flexibility compared to collective investment schemes subject to FINMA supervision. L-QIFs generally fall under the scope of the rules of the CISA and CISO, unless specific provisions do not apply to this vehicle such as those related to investment restrictions (Article 118d of the CISA). L-QIFs also fall under the scope of the self-regulatory standards established by the Asset Management Association Switzerland (AMAS) and recognised as minimum standards by FINMA (Article 126b of the CISO), including the Code of Conduct, the Performance Reporting Directive and the Total Expense Ratio (TER) Reporting Directive. 

In terms of applicable regulations, L-QIFs fall under the scope of the Swiss tax regime applicable to collective investment schemes under Swiss tax laws. Additionally, the provisions of the Anti-Money Laundering Act (AMLA) and, in the case of funds with real estate investments, the provisions concerning the acquisition of real estate by foreign persons (“Lex Koller”) apply, as with all other Swiss funds. 

This collective investment is a new fund category and can be structured as a contractual fund, an investment company with variable capital (SICAV) or a limited partnership for collective investment (LP under Swiss law). It is exclusively reserved for qualified investors and must be administered by an institution subject to FINMA supervision, which will be responsible for ensuring compliance with legal obligations related to this fund category.

L-QIFs organised as contractual funds and SICAVs must be administered by a Swiss fund management company, which may delegate investment decisions exclusively to a collective asset manager under the Financial Institutions Act (FinIA) or to a collective asset manager located abroad and subject to equivalent supervision. An L-QIF structured as a limited partnership for collective investment must always designate a collective asset manager for all management activities. A depositary bank must be appointed for each L-QIF vehicle, and the depositary bank’s obligations under Articles 72 et seq. of the CISA remain unchanged under this new regime. 

The investment requirements, including investment limits and risk diversification rules prescribed by the CISA for approved funds do not apply to the L-QIF which has a much more liberal regime. However, the rules followed must be stated in the fund’s documentation for transparency purposes. Specific investment techniques, such as the use of derivatives, securities lending, repo transactions or leverage must be described in detail in the fund’s regulations. Additional restrictions apply to L-QIFs investing in real estate, including diversification rules (e.g. minimum number of properties to be defined), limitations on leveraging the real estate portfolio (max. 50%) and transactions with “close persons.” 

It should be noted that the L-QIF can be a suitable vehicle for alternative investment strategies or investments with illiquid or difficult-to-value assets, particularly in terms of time to market and flexibility in structuring the product as an open or closed-end fund. 

The institutions responsible for managing L-QIFs are required to communicate specific data, including the establishment of an L-QIF, to the Federal Department of Finance which will maintain a publicly accessible register of all L-QIFs. Regarding auditing, due to the absence of FINMA supervision, the fund management company administering such a vehicle must ensure compliance with legal obligations and the conformity of the L-QIF with the rules prescribed by the CISA at all times (Article 126h of the CISO). The applicable audit rules for an L-QIF explicitly provide for two types of audits: an examination of the annual accounts based on the usual requirements applicable to Swiss collective investment schemes and an additional audit regarding compliance with the characteristics of the L-QIF (Article 118a of the CISA) and reporting and data collection obligations (Article 118f of the CISA).