SWITZERLAND 2013 - HFMWeek

HFMWEEK
S P E C I A L R E P O R T
SWITZERLAND 2013
REGULATION
How the AIFMD and CISA is affecting
the Swiss hedge fund industry
LIECHTENSTEIN
A jurisdiction providing a solid infrastructure
for establishing a hedge fund
DISTRIBUTION
Switzerland remaining an attractive
distribution channel for AIFMs
FEATURING BNP Paribas // Etops // PwC // Schellenberg Wittmer //
Signina Capital // UBS // Valartis Fund Management

SWITZERLAND 2013
Y
ou don’t have to be in the EU to feel the weight
of the European regulatory burden. Just ask
Switzerland’s hedge fund professionals. Whether it’s
the indirect impact of the Alternative Investment
Fund Management Directive (AIFMD) or the
updated Swiss Collective Investment Schemes Act
(CISA), Switzerland is braced for change in much
the same way as its EU neighbours.
The partial revision of the CISA is already in place
and fund managers and service providers, both in and outside Switzerland, now
have a few months to fully comply with the Directive’s regulations in order to
continue accessing and marketing their alternative investment products within
the European market. The AIFMD will provide its own challenges – and a new
standard.
Service providers seem determined to make the most of incoming
requirements by revising their strategies and product offerings in innovative
ways, while managers are hoping that a regulatory seal-of-approval – CISA
or otherwise – can provide an additional layer of quality assurance to their
investors. A few smaller managers may need to reorganise, merge or even move.
Many established organisations, meanwhile, will see that the changes as an
opportunity to help them rise to the top.
Of course, CISA and the AIFMD aren’t the only developments shaping
Switzerland’s investment landscape, and, despite some initial fears about the
consequences of a tightened regulatory regime, most experts expect the country
to maintain if not improve its lofty standing on the world stage.
The economic climate for some is still quite chilly, but this western European
nation is hoping to provide investors with a warm welcome. The changing
shape of middle office management and outsourcing as well as the benefits of
neighbouring domicile Liechtenstein are hot topics, while a group of experts
have come together to gauge the temperature of the fund industry in general.
In this Swiss special, HFMWeek has approached a range of industry movers
and shakers – read on to see what they perceive as the most pertinent issues
currently facing Switzerland’s hedge fund industry.
Jasmin Leitner
REPORT WRITER
HFM
HEDGEFUNDMANAGER
WEEK
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HFMWEEK.COM 3

SWITZERLAND 2013
CONTENTS
06
13
16
19
ROUNDTABLE
SWISS HEDGE FUND ROUNDTABLE: TAKING THE
TEMPERATURE OF THE INDUSTRY
Dr Guenther Dobrauz-Saldapenna of PwC and Corsin Derungs of
Deloitte talk to a range of industry experts about the state of play in
Switzerland
FINANCIAL SERVICES
CLEARING THE HURDLES: MIDDLE-OFFICE
OUTSOURCING
Michael Appenzeller of Etops tells HFMWeek how middle-office
outsourcing can help hedge fund managers to remain competitive
in an ever-changing environment
FUND SERVICES
LIECHTENSTEIN – THE ONSHORE ALTERNATIVE
Franz Glatzl and Wolfdieter Schnee of Valartis Fund Management
explain the different structures available when establishing a
regulated Liechtenstein fund and the advantages of the jurisdiction
for launching alternative investment funds
FINANCIAL SERVICES
AIFMD: SWISS PEAKS AND TROUGHS
Jeffrey Campbell of BNP Paribas securities services in Zurich,
outlines what the AIFMD and CISA regulations will mean for local
asset managers, service providers and the future of the swiss
alternative investment space
21
23
25
29
FINANCIAL SERVICES
NEW RULES FOR THE DISTRIBUTION OF HEDGE
FUNDS IN SWITZERLAND
With Switzerland no longer offering one of the most lenient regimes
for the placement of AIFs due to recent regulatory changes, Dr
Guenther Dobrauz-Saldapenna and Dieter Wirth of PwC Zurich
provide a guide to help navigate these uncharted waters
LEGAL
THE IMPACT OF THE SWISS ACT ON INVESTMENT
FUNDS
With the Swiss legislator implementing further regulation, Anita
Schläpfer of Schellenberg Wittmer examines the impact this will have
on the management and distribution of offshore hedge funds
FUND SERVICES
SWITZERLAND: ONE DOMICILE, A WORLD OF
OPPORTUNITIES
André Valente, head of UBS fund management (Switzerland),
explains what he sees as the opportunities presented by the
implementation of the alternative investment fund management
directive for Switzerland
FINANCIAL SERVICES
LIECHTENSTEIN: A JURISDICTION FOR
INFRASTRUCTURE FUNDS
Martin Kloeck and Juliette Vartikar, of Signina Capital, explain the
advantages of the Liechtenstein jurisdiction for launching Signina’s
water infrastructure fund
4 HFMWEEK.COM

ATTORNEYS AT LAW
BANKING AND FINANCE
Capitalizing on Dedicated Expert Advice
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Your contacts:
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Olivier Favre
olivier.favre@swlegal.ch
Schellenberg Wittmer is one of the leading business law firms in Switzerland. Over 130 lawyers
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in all aspects of business law.
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SWITZERLAND 2013
SWISS HEDGE FUND
ROUNDTABLE: TAKING THE
TEMPERATURE OF THE
INDUSTRY
DR GUENTHER DOBRAUZ-SALDAPENNA OF PWC AND CORSIN DERUNGS OF DELOITTE TALK TO A
RANGE OF INDUSTRY EXPERTS ABOUT THE STATE OF PLAY IN SWITZERLAND
Dr. Guenther
Dobrauz-
Saldapenna
heads PwC Zurich’s Asset
Management Regulatory
practice. Previously, he
practised with another Big4
company and worked as an
attorney. For a number of
years he also served as legal
counsel to a VC/PE firm and
an international hedge fund.
He holds a Ph.D in investment
law and an MBA.
Corsin Derungs,
attorney-at-law, is in charge
of asset management in the
regulatory, compliance & legal
services unit at Deloitte Zurich.
Earlier in his career, Corsin
worked for a Swiss law firm
and in the Legal Department
of a large Swiss Bank.
Guenther Dobrauz-Saldapenna (GDS): Since the
last session of our Swiss Hedge Fund Roundtable
a year ago, the regulatory changes associated most
notably with the Alternative Investment Fund Managers
Directive (AIFMD) in the EU and the partial
revision of the Swiss CISA have become much clearer.
How are you responding to this new and altered
regulatory reality?
Bernhard Steiner (BS): It’s true, the precise wording
of the new laws and the key regulations are now available.
But when I talk to people in
the industry, I sense a high degree
of uncertainty. Many participants
say that they are still waiting
for more clarity. There are
open questions about deadlines
and transitional regulations, and
even the impact of the new laws
on existing products is unclear.
In Switzerland, the revised CISA
is critical for small investment
managers with small funds. I
know of many managers who are
in discussions with other market
participants regarding collaboration
as a means of responding to
the new regulations. In addition,
there are an increasing number of
service providers that offer a kind
of regulatory roof for small managers. With this trend,
one of the objectives of Switzerland’s Finma – a consolidation
of the market – is under way.
Thorsten Eiglmeier (TE): Firstly, it helps a lot that
the new regulatory requirements are clearer now. This
enables Swiss Alpha to prepare for regulation or additional
licensing if necessary. In our opinion, ultimately
the recent changes will lead to stronger positions for asset
managers.
WE WILL BENEFIT FROM
THE BRANDING OF
AN INTERNATIONALLY
RECOGNISED LICENCE THAT
IS UNIFORMLY REGULATED
IN ALL EU JURISDICTIONS
DOMINIK LISIBACH, SIGNINA CAPITAL
”
Dominik Lisibach (DL): A year ago we reached the
conclusion that direct access to the European Economic
Area (EEA) would be more advantageous than
the Swiss Finma/CISA licence, especially when managing
Alternative Investment Funds (AIFs) in the EU
or having European investors. In response to this decision,
we will establish a new management company
in Liechtenstein which, through its EEA membership,
will implement the AIFMD regulations. Signina Capital
(Liechtenstein) will apply for an AIFM licence in Liechtenstein
as soon as possible and we expect to be AIFMlicensed
as of July 2013. This also
means that we will have upgraded
our risk and compliance monitoring
systems and reviewed all our
internal processes to ensure that
they are compliant with the new
regulations. By doing so, we will
benefit from the branding of an
internationally recognised licence
that is uniformly regulated
in all EU jurisdictions, similar to
Ucits. Additionally, with the EU
marketing passport, we will have
non-discriminatory distribution
access to a harmonised EU funds
market. We’re therefore fully
convinced that we took the right
decision a year ago.
Pendo Löfgren (PL): Arnova only has an advisory
company in Switzerland, while the investment manager
is offshore, so strictly speaking we are not forced
to change anything related to the Swiss operation due
to either AIFMD or CISA. However, from a marketing
and distribution point of view, it does present challenges.
The manager would certainly like to distribute its
products within Europe and possibly Switzerland. To
achieve this, the manager is actively considering relocating
to Liechtenstein and obtaining a licence there.
6 HFMWEEK.COM

ROUNDTABLE
Pendo Löfgren
is CEO of Arnova and has
been a self-employed
computer programming
consultant since the
age of 19. Pendo studied
in parallel at various
Swedish universities. He
has devoted the past 13
years to developing and
implementing quantitative
trading strategies.
Maria Llanes
is client relations manager
at Oceano Advisors AG,
where her work mainly
focuses on the European
institutional markets.
She is a lawyer, currently
writing her Ph.D in AIFM
regulation and has studied
finance at IEB (Spain) and
the London School of
Economics (UK).
Dominik Lisibach
is Signina Capital AG’s Risk
Manager. He started his
career at UBS before joining
Signina to become a leading
consultant in building fund
structures in the Cayman
Islands, Luxembourg and
Liechtenstein. He is director
of a Luxembourg SICAV-SIF.
Dominik is a Chartered
Financial Analyst.
Thorsten Eiglmeier
is CEO of Swiss Alpha, where
he is responsible for business
development. Active in alternative
investments since 1989,
he has been a co-founder,
manager and shareholder of
companies focused on real
estate and closed-end funds.
He also serves as a board
member of several financial
services companies.
Bernhard Steiner
is Moneywell’s CIO. He was
previously managing partner
at Alternative Investment
Partner AG. Before that, he
was managing director of
a CTA. Bernhard has more
than 20 years of experience
as a financial analyst and
business consultant and
studied law and information
technology.
However, a prerequisite for this move is that the European
passport for Liechtenstein managers is confirmed
and functional. In the long term, Switzerland remains
an attractive option from a marketing perspective due
to the Swiss brand, which we still consider to be very
strong. We expect that the EU and Switzerland will
reach an agreement on common rules for managers,
thereby enabling Swiss managers to market throughout
Europe. But the time it will take could be considerable.
Corsin Derungs (CD): It has often been said that
change creates opportunity. How are you turning
these changes into benefits?
PL: I can imagine that the changes could result in wiping
out a few smaller managers and making the market
less competitive, which is good for us even if it is bad
for end-investors. Those who can successfully navigate
these regulations will probably be seen as more stable
and resourceful managers, by some investors at least.
TE: We believe that Swiss Alpha complies with all regulatory
requirements and will continue to do so in the
future. This ensures greater safety and professionalism
for our investors, which is something they definitely appreciate
in the same way as our early move to the Ucits
space. Ultimately, we believe that this commitment
to continued regulatory compliance helps to separate
Swiss Alpha from competitors and smaller asset managers.
Maria Llanes (ML): In response to the introduction
of the EU marketing passport, Oceano Advisors was
recently established for the purpose of distributing the
funds managed by Signina Capital. We think that non-
EU managers (such as Swiss CISA-licensed managers)
are unlikely to gain access to the EU market before at
least 2016. We also see many countries, such as Germany,
implementing strict private placement regimes after
July 2013 or even abolishing the practice. As such, we
strongly believe that the EU passport will create a new
branding standard for alternative investment funds and
offer strong opportunities throughout the EU.
BS: As a rather small provider, we see opportunity in
collaboration with other players. Two or three years
ago every asset manager wanted to have their own
small, offshore fund. Today they are open to the idea
WE EXPECT THAT THE EU AND SWITZERLAND WILL
REACH AN AGREEMENT ON RULES FOR MANAGERS,
THEREBY ENABLING SWISS MANAGERS TO MARKET
THROUGHOUT EUROPE. BUT THE TIME IT WILL TAKE
COULD BE CONSIDERABLE PENDO LÖFGREN, ARNOVA
”
of merging into one bigger, better-regulated fund such
as a Ucits fund. For our part, I can say that the new regulations
have forced us to think about our core competencies.
As a result of this process, we have geared
our business more towards consulting, research and
engineering. We have started to cooperate with already
regulated entities and we aim to become a knowledge
provider based on our specific expertise in trading,
manager due diligence and systematic asset manage-
HFMWEEK.COM 7

SWITZERLAND 2013
ment approaches as well as our extensive industry network.
GDS: Many industry experts believe that institutional
investors, especially pension funds and insurance
companies, actually need investments in alternative
asset classes such as hedge funds in order to
generate the alpha necessary for their portfolios to
meet their contractual obligations. Do you see this
confirmed in your fund-raising discussions?
TE: Definitely. Because of comparatively low-performing
bond markets and politically driven equity markets,
Swiss Alpha is seeing an increase in demand from institutional
investors for alternative investments. Their
justified aim is to ensure performance under all market
conditions, something that has been recognised as possible
with equal hedge funds.
BS: At the risk of being branded a heretic, I would say
that pension funds, insurance companies and many
8 HFMWEEK.COM
other institutional investors do not need hedge funds.
The definition of hedge funds is not specific enough.
What they really need are systematic investment management
approaches that attach the greatest priority
to risk management and not just risk measurement, as
traditional asset managers often do. Systematic strategies
implement an investment process for the upside
(seeking returns by taking risk) and for the downside
(a predefined process if something undesirable occurs
AT THE RISK OF BEING BRANDED A HERETIC, I WOULD
SAY THAT PENSION FUNDS, INSURANCE COMPANIES AND
MANY OTHER INSTITUTIONAL INVESTORS DO NOT NEED
HEDGE FUNDS BERNHARD STEINER, MONEYWELL
”

ROUNDTABLE
ucts that are non-regulated. What we see is that European
institutions are already requesting due diligence
at the AIFMD level, and we are happy to be able to offer
alternative investment funds in a completely regulated
environment.
PL: What we hear is that pension funds want products
that are able to participate in a very large chunk of the
upside but also provide meaningful downside protection,
such as in a 2008 scenario, for example with 80%
of the upside while limiting the potential downside to
30-40% of the broad market. These strategies are tricky
to develop, as they nearly always involve market filters
(such as risk on/off) which have too few historical instances
to be reliable. If you adapt the strategy to trade
more frequently in order to get more data points, its capacity
limit drastically decreases, effectively making it
uninteresting for pension funds.
CD: AIFMD, although primarily targeted at managers,
also has a significant impact at the product
level. It is believed by industry participants that, at
least in Europe, AIFMD compliance will become as
dominant a design at the manager level as Ucits has
at the retail product level, and that it will have similar
effects on products, i.e. the gradual on-shoring
of AIFs, increased use of Ucits and of managed accounts.
What is your view on this?
PL: In this respect, I see Ucits as a far better investor
guarantee than the manager being AIFMD-compliant.
Ucits is far more specific when it comes to the investment
restrictions, such as leverage or liquidity, and custodianship.
Of course, there is no doubt that the manor
circumstances change). In a systematic investment
management approach, the protection of investors’ capital
is part of the value proposition. This is exactly what
institutional investors really need. They are forced to
apply fixed rules for the shift between asset classes and
they understand hedge funds as one alternative investment
class. They buy hedge funds to improve their diversification
although they don’t need hedge funds per
se. They need real diversifiers, such as trading strategies
and different return sources that are reliably uncorrelated
to equities and bonds.
Another option is having allocations that are negatively
correlated to equities which work as a hedge
against equity drawdowns, like some volatility strategies.
We notice an increasing interest in alternative
investments but we are concerned that many investors
just generally add hedge funds as an asset class.
ML: Post-financial crisis, a fear of non-regulated funds
has been emphasised repeatedly by our institutional clients.
This type of investor cannot risk exposure to prod-
AN AERIAL VIEW OF GENEVA, SWITZERLAND
BS: One objective of the new regulations is to establish
AIFs as a safer haven for former offshore investors, but I
have the impression that the message, that Ucits are for
retail and AIFs for professional investors, has not quite
reached most investors yet. When it comes to European
funds, everybody is talking about Ucits. If an investor
does not like Ucits, they go to platforms like DB Select.
AIFs must first be established as a quality brand and I
think there is still a lot of educational work to be done
to ensure a better understanding of the AIFMD concept.
TE: Predictions are always difficult, but what we clearly
see is the increasing interest of institutional investors in
Ucits-compliant alternative strategies, especially in the
German-speaking region. The Ucits framework simply
provides more safety, transparency and liquidity advantages
for retail and institutional investors alike.
DL: We are strongly convinced that AIFMD will become
the new brand for alternative investment funds, as
Ucits is for mutual funds. In order to take full advantage
of the regulation and be able to use the EU passport, the
AIFs and AIFMs have to be located in the EEA. As far
as we are concerned, this is a perfect fit from a management,
marketing and investor standpoint and we think
that the trend of on-shoring AIFs will continue.
HFMWEEK.COM 9

SWITZERLAND 2013
to offer certain strategies such as trend-following to
retail clients. Because the Ucits regime bans commodities,
a broadly diversified trend-following Commodity
Trading Advisor (CTA) can’t implement its strategy
in a Ucits fund. We observe that some managers offer
their strategy without the commodity component or
they gain commodity exposure via indices that actually
can be implemented in a Ucits. These are rather new
strategies aimed at complying with the new regulations.
However I don’t think that this is in the interest of investors;
in fact by prohibiting certain return sources,
retail investors can’t get real portfolio diversification.
TE: Normally, alternative strategies are highly complex
and investors accordingly require in-depth explanations
so they can clearly understand the strengths and
weaknesses of the given strategy. That being said, in
general our own experience with platforms has been
rather negative. We also feel that platform costs are
sometimes disproportionate to the derived benefits.
We clearly focus on investing in our existing relationships
and on collaborating with other specialists.
PL: We currently do not expect to participate in any
platforms, mainly for disclosure reasons. To participate,
the manager would be expected to disclose too
much information about their strategies for this to be
an attractive option.
CD: Performance is key, but now that the lessons
from the recent crisis have been digested, there
seems to be a huge shift in focus towards risk management
– both for managers and investors. Do you
see that?
ager can still lose money in a Ucits product. I think the
increased use of managed accounts was a very strong
trend already, regardless of the AIFMD, but yes, I most
definitely believe that AIFMD will lead to an increase in
the on-shoring of AIFs.
GDS: As to the impact of AIFMD, but even more
so the CISA revision, on established distribution/
placement processes and strategies, many players
are currently contemplating platforms and indeed
entirely new strategies. What is your take on this?
DL: Signina has its own regulated platforms in Liechtenstein
and Luxembourg, and Oceano, as our distribution
partner, has the knowledge and network to promote
the funds within the EU. As we run the portfolio
and risk management in a fully AIFMD-compliant manner
for our own funds, we are also considering collaborations
with other selected managers who don’t have
the size or ability to set up their own AIFMD-compliant
company.
BS: I see an increasing demand for having managers on
platforms. While platforms can be the solution for professional
investors, they don’t solve the problem of how
BS: Is this shift to risk management really taking place?
In response to the recent rally in equity markets, we
have been asked by many investors why our portfolios
did not produce the same high returns as equities. Our
setup is very simple: we avoid the typical deep setbacks
in equities and therefore require less strong rallies than
PREDICTIONS ARE ALWAYS DIFFICULT, BUT WHAT
WE CLEARLY SEE IS THE INCREASING INTEREST OF
INSTITUTIONAL INVESTORS IN UCITS-COMPLIANT
ALTERNATIVE STRATEGIES THORSTEN EIGLMEIER, SWISS ALPHA
”
we have seen in the past few months. But overall, our
rate of return is better compared to a traditional portfolio.
We have less downside deviation and smaller drawdowns.
The mindset of most investors is still driven by equity
returns. Traditional asset management remains
10 HFMWEEK.COM

ROUNDTABLE
very closely tied to the typical shift of asset classes,
although today everybody knows that they are highly
correlated to each other and even more so in crisis
situations. There needs to be a lot of education and
knowledge transfer, for people to realise that it is risk
management that defines the blueprint for the patterns
of future returns. Trading strategies focus squarely on
risk management and they allocate liquidity to different
INVESTORS ARE NOT WILLING TO PUT THEIR MONEY
IN FUNDS WHERE THE MANAGER DOES NOT HAVE A
THOROUGH RISK MANAGEMENT PROCESS
MARIA LLANES, OCEANO ADVISORS
”
return sources, which is the essence of real diversification.
We explain to investors that we resolutely pursue
risk management in our investment tactics. By trying to
avoid the deep setbacks our portfolios are less volatile
and the return streams are more sustainable. Nonetheless,
when equities gain 10% in the first few weeks of the
year, many investors also want to see that reflected in
their portfolios.
PL: Perhaps investors are realising that performance
and risk management cannot really be separated – performance
should always be adjusted to take into account
the risk involved, and that includes not only actual
trading risk, but also operational risk and regulatory
risk. On this point, however, I am not overly optimistic.
After some more time in a bull market environment, I
think investors will once again chase the highest-performing
investments in absolute terms without regard
for risk.
TE: Indeed. We clearly see this when speaking with our
existing and potential investors. They all want to learn
how we manage risk and what exactly we are doing to
protect their investment. It’s very simple: if the investor
identifies risks we have not addressed or cannot hedge,
we’re out.
ML: This is our experience as well. Investors are not
willing to put their money in funds where the manager
does not have a thorough risk management process and
state-of-the-art risk systems. It definitively helps in our
conversations with potential investors that Signina, as
the manager, has implemented both of the above.
GD: How do you see the outlook for your particular
strategy in the next 12 months?
PL: In very broad terms, high market volatility is beneficial
to our strategies, even though they will still perform
acceptably in other environments. It’s hard to tell which
COMPANY INFORMATION
environment will develop in the coming 12 months.
BS: We implement our strategy in a Ucits IV fund now.
With this fund, the new regulatory regime allows us to
have a setup which provides initial and ongoing manager
due diligence and portfolio design. Our partner is
regulated as an investment manager and is doing their
job based on our knowledge and research. We are optimistic
about getting good inflows into the fund in the
next few months. If volatility remains at the low levels
seen in the past few weeks and stock prices continue to
rise, our performance will likely underperform equities.
If they retreat and volatility increases, we’re convinced
that we can outperform traditional portfolios.
TE: In the recent, rather politically driven market environment,
it is indeed a challenge to manage the risk
while still delivering good performance. Nonetheless,
for the remainder of 2013 we foresee moderately rising
markets with decreasing volatility and are rather optimistic.
DL: Signina will benefit from the AIFMD branding,
and our funds are likely to grow in assets due to the new
opportunities the EU passport offers. We expect that
more managers will join the Signina platforms as they
can no longer afford not to be regulated. We do not expect
that the “de minimis” rule will succeed in Switzerland,
because no manager will want to be alone in being
unregulated. Similarly, for the grandfathering period;
the pressure from service providers and investors will
increase, and they – and not necessarily the regulators –
will determine the timeline.
Arnova Fund SP One is a segregated portfolio of Arnova Fund SPC, domiciled in the Cayman Islands.
The fund is managed by Arnova Asset Management Ltd (Cayman Islands) and applies quantitative
investment strategies supplied by the fund’s investment advisor, Arnova Investment Research Ltd in
Zug. The strategies have been running successfully since March 2003.
Signina Capital AG is a Swiss financial services provider founded in 2006 and focuses on niche
investment strategies. It operates fund platforms in Luxembourg and Liechtenstein and offers tailormade
solutions to fund managers and investors. Oceano Advisors AG is Signina’s distribution partner
and will, with its EU marketing passport, promote the funds managed by Signina.
SWISS ALPHA GmbH was founded by two derivatives specialists and an entrepreneur in 2004. SWISS
ALPHA is an independent, ambitious investment consultant for alternative investment strategies.
The company is future-oriented, modern and always geared towards further development. The
company’s services are aimed at institutional investors, as well as multimanagers, private banks and
HNWIs. Its desire is to become a recognised investment boutique for alternative investment strategies
throughout Europe.
Moneywell is a Swiss investment management consultancy established in 1996 and specialises
in investment strategies with asymmetric return profiles such as managed future to deliver
diversification, liquidity and transparency to institutional clients and HNWIs. It operates an
independent B2B distribution platform for investment products with a specific focus on trading
strategies. The offering ranges from single manager funds to multimanager portfolios that are
implemented as funds or managed certificates.
HFMWEEK.COM 11

Oceano Advisors is your institutional solution provider, entirely dedicated to
your investment needs
Our platform offers niche investment content, such as cash-yield strategies,
non-correlating returns and infrastructure project access. We combine
investment talent with AIFM compliance and risk-management requirements.
Oceano Advisors AG
Lavaterstrasse 40CH-8002 Zurich
T. +41 44 205 99 34F. +41 44 205 99 44info@oceanoadvisors.comwww.oceanoadvisors.com

SWITZERLAND 2013
FINANCIAL SERVICES
CLEARING THE HURDLES:
MIDDLE-OFFICE OUTSOURCING
MICHAEL APPENZELLER OF ETOPS TELLS HFMWEEK HOW MIDDLE-OFFICE OUTSOURCING CAN HELP HEDGE FUND MANAGERS TO REMAIN
COMPETITIVE IN AN EVER-CHANGING ENVIRONMENT
Michael
Appenzeller
is co-founder of Etops.
He started his career as
a strategy consultant and
became a project manager
in the asset manager
practice of Oliver Wyman. In
2006 he joined Horizon21
Wealth Management in
Pfaeffikon, Switzerland,
as business manager
and member of the
Management Committee,
being responsible for
strategic development
and operations. In 2008
he joined AgaNola, a
convertible bond specialist
firm, as the chief operating
officer and chief financial
officer and successfully built
a fully institutional asset
management platform.
In light of increasingly tough regulations, rising
business costs and more specific client needs,
hedge fund managers in Switzerland need to up
their game to stay on top. Michael Appenzeller
talks to HFMWeek about how middle-office
outsourcing can help managers to implement
their business strategies and focus on the things they
do best, while leaving the rest to competent service
providers.
HFMWeek (HFM): You’ve spoken previously about
this being the age for the right business model. What
is this model that hedge fund managers should try to
achieve?
Michael Appenzeller (MA): It really depends on who
you are; there is no generic business model for a hedge
fund manager. One thing is for
sure: your potential clients basically
only want you to provide investment
security and investment
returns. That’s simple but not easy.
I think the most important thing
is that you consider what your key
strengths and core competencies
really are. Based on what you are
extremely good at, you then need
to define a focused business strategy
and decide on who you want
to be in three to five years time.
And then it’s all about absolute
focus on this. And that’s where it
really starts. Our most successful
clients are sometimes so focused
both as people and businesses it’s
impressive and challenging for us
to work with them at the same
time. We like that a lot because we are equally focuses on
just one thing: operations.
Today’s client not only looks at you as a hedge fund
manager but also as a business. They look at your operational
risks, your reporting and at your flexibility in catering
to the needs of individual clients. The key thing is that
you don’t have to do everything yourself, you can have
people that integrate into your business very seamlessly to
compensate for things you might not have the core competence
to do. That is how I would try to shape the business
model.
YOU CAN HAVE PEOPLE
THAT INTEGRATE
INTO YOUR BUSINESS
VERY SEAMLESSLY TO
COMPENSATE FOR THINGS
YOU MIGHT NOT HAVE THE
CORE COMPETENCE TO DO
”
HFM: How can Etops help hedge fund managers find
the right model?
MA: We are helping in two ways. We are specialists in
operations and we also know about strategy, so we can
play a part in strategic discussion to help clients decide
what they want to do with their operations and how that
can improve the implementation of their strategy. We
can then also help with outsourcing as we are able to take
over the complete operations processes or just a modular
part of it. In insourcing the client’s operations process,
we solve one of the important questions of their business
model. We are regulation-compliant and due diligence
ready, working seamlessly with the in-house team and
lowering operations costs.
HFM: How is regulation impacting this business
model?
MA: The full extent of regulation
and its impact isn’t clear yet.
I think it is relatively certain that
most people are going to be regulated
in one way or another. What
that means is that you have to go
through a detailed catalogue of
questions aimed at your business
model. You need to ask how your
contingency plan, your risk management
and your operations are
working among many sometimes
more formal things. It is going to
mean that we might see a more formal,
and maybe also more “professional”
space, in comparison with
the unregulated world. I think that
it is also going make the hurdles
to being in the business higher,
as the costs are rising. That puts pressure on our clients,
who have to ask themselves if they are specialised and fit
enough to be in the business, as the hurdles to enter it have
just become higher. That is really relevant in Switzerland,
where the costs for everything are really high.
HFM: Why is middle office outsourcing becoming
more relevant?
MA: As the hurdles of being in the business get higher and
the competition becomes more intense, because of regulation
and costs but also as clients are more demanding,
HFMWEEK.COM 13

SWITZERLAND 2013
FINANCIAL SERVICES
middle-office outsourcing allows you to be more stable,
professional and contingent in your operations, as well as
lowering your costs and helping you to be cost-efficient. It
is a way of breaking through this trade off between
costs and stability – you can have both things
through middle-office outsourcing.
HFM: What differentiates yourselves from administrators
and prime brokers?
MA: The important thing to understand is that we
are an integrated part of a hedge fund manager. We
only work on infrastructure and data of the client
and we are constantly working with our clients –
the traders and portfolio managers. We integrate
ourselves fully; it is no different to having your
own operations. We are part of your team. The
other part of our job is to control the administrator,
the prime broker and other third parties and
to make sure that what we see is what we would
expect to, and if there are differences, we go after
them. We are independent from any third party
which is key. We are on the manager’s side and I
think that is a big difference.
HFM: How is technology influencing middle-office
solutions?
MA: Technology is going to play a central industry role
in the next five to 10 years. Some people might think
I THINK THE WINNERS WILL
BE PEOPLE WHO THINK
RADICALLY AND WHO CAN
BE EXTREMELY DISCIPLINED
IN DEFINING WHO THEY
WANT TO BE
”
everything is already automated, but that is not the case
– things break down and go wrong all the time. Going
back to the issue of more intense competition and higher
costs, you have to focus on technology to restructure
costs and potentially reshape a business
model. Technology can change your business
model and I think we are going to see that – technology
is going to be vital. It is much more than
just having a database where you have your positions
and your risk figures. It has the potential, as
we see in other sectors such as the consumer sector,
to change a business model and our industry
is ready for it, even though many people don’t see
it coming yet.
HFM: Who are going to be the winners in these
changing times?
MA: It’s a tough question. We can’t see around the
corner, so it’s going to be someone we don’t know
about yet. I think the winners will be people who
think radically and who can be extremely disciplined
in defining who they want to be. If you have
a speciality in credit then you only do that and you can
only hire people with that specialism. You won’t specialise
in reporting or in operations systems – you will choose
those who do – and that way you can specialise in making
more out of your clients’ money. Radical people are going
to be the successful ones.
14 HFMWEEK.COM

www.pwc.ch
Is your business
in harmony?
dieter.wirth@ch.pwc.com, +41 58 792 44 88

SWITZERLAND 2013
LIECHTENSTEIN – THE
ONSHORE ALTERNATIVE
FRANZ GLATZL AND WOLFDIETER SCHNEE OF VALARTIS FUND MANAGEMENT EXPLAIN THE DIFFERENT STRUCTURES AVAILABLE WHEN
ESTABLISHING A REGULATED LIECHTENSTEIN FUND AND THE ADVANTAGES OF THE JURISDICTION FOR LAUNCHING ALTERNATIVE INVESTMENT FUNDS
Franz Glatzl is CEO of
Valartis Fund Management
(Liechtenstein) AG, heading up
fund design and relationship
management as well as
investment management for
special mandates. He holds
three economic university
degrees based on studies
in Austria and the US and
has successfully structured
numerous large-scale fund
solutions for institutional
investors and HNWIs.
At the moment, rapidly changing regulations
impact Alternative Investment Fund
Managers (AIFMs) on both the manager
and the product level. They require AIFMs
to question the appropriateness of their
current organisational setup and products,
such as the implementation of onshore or offshore funds,
the domicile of choice and the legal form of the investment
vehicle.
The recent market survey, “The Impact of New Regulation
on the Swiss Alternative Investment Fund Manager
Industry” (for a free copy of the study please get in touch with
the authors of this article), indicates that there is huge potential
interest on the part of AIFMs to domicile funds onshore
and that future funds will reside within jurisdictions
of the European Union (EU) or European Economic Area
(EEA). This presents a clear opportunity for a jurisdiction
such as Liechtenstein.
LIECHTENSTEIN FUNDS
Contrary to other European fund domiciles, Liechtenstein
is clearly focused on AIFs. Currently, 40% of the funds
launched in Liechtenstein are Undertakings for Collective
Investments in Transferrable Securities (Ucits) funds,
whereas the remaining 60% are non-Ucits funds, which
will be categorised as AIFs from July 2013 onwards. Liechtenstein
is able to offer the required legal opportunities,
in a flexible and easily understandable manner, to launch
funds focusing on non-traditional investment strategies.
Furthermore, Liechtenstein has successfully been integrated
in the harmonised European market for collective
investment schemes through its EEA membership for
more than 15 years.
Through the transposition of the European Ucits and
AIFM directive in Liechtenstein, fund managers are able to
launch funds within regulatory frameworks that allow them
to carry out their strategies properly, while complying with
EU regulations when it comes to distributing the products.
The subsequent chart highlights the regulatory frameworks
available in Liechtenstein, whether they are suitable to retail
or professional clients, the legal forms as well as the potential
structuring possibilities on the fund level (see table below).
LIECHTENSTEIN UCITS/NEWCITS FUNDS
The Ucits framework, although subject to very tight regulation
in terms of accessible investments, applied investment
techniques, liquidity and diversification, still allows
for the launch of many alternative strategies.
Retail Funds
16 HFMWEEK.COM
AIFs and Ucits fund structures
Available fund structures in Liechtenstein
Funds for professional investors
Ucits Funds – Exchange Traded
Funds**
AIF*
Legal form
Common Contractual Fund (CCF), Fonds
Commun de Placement (FCP)***
Unit Trust, Authorised Unit Trust (AUT)
Société d’Investissement à Capital
Variable (SICAV), Open-Ended Investment
Company (OEIC)
Limited Partnership (LP), Société en
Commandite de Placements Collectives
(SCPC)***
Partnerships of Limited Partners (PLP)***
Other legal forms****
Single Funds Umbrella Funds Funds of funds Share Classes Side Pockets
* From 23 July 2013 onwards
** Prospectus has to be submitted according to the EU Prospectus Directive
*** Only applicable to AIFs
**** If necessary, other legal forms can be implemented through the Liechtenstein AIFM Ordinance if the are in
accordance with AIFMD
LIECHTENSTEIN HAS
SUCCESSFULLY BEEN
INTEGRATED IN THE
HARMONISED EUROPEAN
MARKET FOR COLLECTIVE
INVESTMENT SCHEMES
THROUGH ITS EEA
MEMBERSHIP FOR MORE
THAN 15 YEARS
”

FUND SERVICES
In the Ucits and indeed NewCITS area, Liechtenstein
has applied a Management Company (ManCo) system,
allowing service providers such as Valartis Fund Management
to delegate the investment management to a
licensed Ucits manager, such as a MiFID company or an
AIFM with additional Ucits management licensing, while
the ManCo carries out additional tasks such as risk management,
administration and regulatory reporting.
In the absence of a delegation to an external investment
manager, the Liechtenstein ManCo can also act as
the investment manager itself, providing the option of appointing
an advisor specialised in the fund’s investment
strategy. As advisory services are not currently subject to
any supervision, they can be carried out by a non-licensed
counterparty. Proof that the services carried out are purely
advisory is required. The delegated and licensed investment
managers can also appoint an advisor who would be
subject to the same conditions.
Within a Liechtenstein-based Ucits fund, the depository
function is carried out by one of the domicile’s wellcapitalised
banks and if required, a prime broker of choice
can be appointed by the depository as sub-custodian. The
entire structure is supervised by an auditor as well as by
the Liechtenstein Financial Market Authority (FMA) (see
flow chart below).
Ucits/NewCITS Fund
(FL)
Wolfdieter Schnee
is a key member of Valartis
Fund Management’s
relationship management
team. Before this he held
responsible positions at
other fund service providers
as well as at the office of
a Member of the European
Parliament. Wolfdieter
studied in Brussels and
Vaduz and holds a Master’s
degree in Banking and
Financial Management.
functions of the AIFM, such as administration, marketing
and asset-related activities, can be delegated to a
licensed Liechtenstein administrator such as Valartis.
Furthermore, risk management, although regarded as a
core function, can also be delegated as long as the counterparty
has a Liechtenstein FMA-granted risk management
licence, allowing the AIFM to operate within a
streamlined structure and focus on their core competency
– investment management.
A unique feature of the Liechtenstein environment is
that a prime broker, appointed by the AIFM, can work
alongside the depository without needing to be a sub-custodian,
allowing securities to be easily deposited with the
prime broker (see flow chart below right).
BEYOND UCITS AND AIFS
For fund managers who are looking for funds with special
features such as distribution to specific client segments, as
well as limited publishing duties, Liechtenstein can also
provide funds that go beyond the general legal frameworks
of Ucits and AIFs.
The “AIF for qualified investors” is a fund which does
not receive a European distribution passport, but which
allows investment managers to pool their private clients
within such a fund. The conditions which give a private
client access to such a fund are wider than those governing
“passported” funds under the AIF regime. Additionally, if
the investor circle only consists of members of a single
family, a “Smart-fund” can be set up.
Depository
(FL)
Subcustodian
Prime broker
(PB)
Supervision
FMA
As a result of the latest clarifications on the trash quote
as well as definitions of an index sent out by ESMA, the
launch of specific types of alternative investment strategies,
such as Commodity Trading Advisors (CTAs), within
a Ucits structure is increasingly difficult
or even impossible. Taking into account the
standardisation and soft branding as well as
modified investor expectations indicated by
about 50% of Swiss AIFMs featured in the
previously mentioned market study, an AIF
could be a valid alternative to a Ucits fund as
explained below.
LIECHTENSTEIN AIFS
As the Alternative Investment Fund
Manager Directive (AIFMD) regulates
the managers rather than the products
themselves, the AIFM is regarded as a
central element of the AIF structure. The
chart demonstrates how certain non-core
Investment Management
ManCo Advisory
(FL)
Investment
Management Delegation
Investment Manager
(EU/EEA)
Depository
(FL)
Subcustodian
FMA
Advisor
Auditor
Audit
CONCLUSION
Liechtenstein offers many possibilities to fund managers.
Whether they are seeking a regular Ucits, a specialised
AIF or a concentrated family office fund, Liechtenstein
can offer suitable, regulated and fully EEA-compliant
fund structures. A broad knowledge base and highly competitive
environment, legal flexibility and the provision
of tailor-made incentives to AIFMs and their funds make
Liechtenstein a successful fund domicile.
Valartis Fund Management (Liechtenstein) AG, part of the
Swiss stock exchange listed Valartis Group AG, offers professional
services while allowing clients to implement their own
structures and/or to plan the migration of existing structures.
Please visit www.valartisfunds.li for more information or personally
get in touch with us.
Alternative Investment Fund (AIF)
(FL)
Delegation of
administration,
AIFM
(EU/EEA)
marketing, etc.
Advisory
Administrator
(FL)
Advisor
Delegation
of risk
management
Risk manager
(FL)
PB
Prime broker
(PB)
Subcustodian
Auditor
HFMWEEK.COM 17

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Cutting edge
Institutional
Due diligence readiness
Technology
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Swiss precision
Stability

SWITZERLAND 2013
FINANCIAL SERVICES
AIFMD: SWISS PEAKS AND
TROUGHS
JEFFREY CAMPBELL OF BNP PARIBAS SECURITIES SERVICES IN ZURICH, OUTLINES WHAT THE AIFMD AND CISA REGULATIONS WILL MEAN FOR
LOCAL ASSET MANAGERS, SERVICE PROVIDERS AND THE FUTURE OF THE SWISS ALTERNATIVE INVESTMENT SPACE
Jeffrey Campbell
is head of sales at BNP
Paribas Securities Services
in Zurich, responsible for
Swiss asset managers
and alternative clients. He
joined BNP Paribas in May
2010 from Brown Brothers
Harriman in Zurich, where
he was country head and
global relationship manager
for financial institutions
based in Italy and in the
Swiss-Italian region.
Although Switzerland is not part of the
European Union (EU), it has integrated
many provisions of the Alternative
Investment Fund Managers Directive
(AIFMD) pertaining to managers and
their roles, into its fund laws. Switzerland
is in a unique position as a non-EU domicile for alternative
asset managers, whereby we find two types of managers:
a) those who manage EU alternative investment
funds that are marketed within the EU and b) those who
manage non-EU alternative investment funds marketed
within the EU.
In general, managers established in Switzerland, managing
assets in excess of CHF 100m, require a licence from
the Federal Authority for Financial Market Supervisory
Authority (Finma), unless they are already subject to an
equivalent supervisory regulator in their own country of
domicile. Through the partial revision of the Collective
Investment Scheme Act (CISA), which has come into effect
as of 1 March, the law aims to standardise and regulate
the managers of investment products, such as alternative
funds, and improve their transparency in the local market.
Although this law is meant to ensure that Swiss asset
managers continue to access the hugely important EU
harmonised market, it also raises a number of challenges;
namely that managers must adapt to a newly regulated
environment which differs significantly from the previous
situation, where Switzerland previously had a reputation
for being a “soft-touch” market in regulatory terms.
At BNP Paribas Securities Services, we believe it is es-
HFMWEEK.COM 19

SWITZERLAND 2013
FINANCIAL SERVICES
sential for service providers to communicate clearly and
be proactive in helping managers navigate the upcoming
regulatory changes. Service providers must be able
to influence, understand and anticipate market changes
in order to deliver the expertise and solutions that meet
managers’ expectations. In this respect, given the scale of
our activities in this sector throughout Europe, we see ourselves
as an industry leader.
ANTICIPATED CHALLENGES AND NEW OPPORTUNITIES
The new AIFMD regulatory regime provides for increased
transparency and explicit allocation of risk between
the investor, the manager and the service providers
to the fund, including depositaries, prime brokers
and other trading counterparties. This is likely to result
in increased costs that managers will face in their operations;
ranging from the need to incorporate or upgrade
risk-management systems, to take on new staff or
to hire a fund manager to help with the distribution
of a product. Proportionally, what might be
a minor cost increase for a large manager could
potentially be quite a substantial cost increase for
a small, boutique-style asset manager.
From an EU perspective, BNP Paribas Securities
Services has undergone an internal review to
adapt our processes and directives, as well as our
solutions to clients, in order to ensure that we will
be AIFMD-compliant.
In Switzerland, some managers can potentially
be lacking a full overview about the implementation
of the new directive and what the key points
of consideration are. In addition, they must also
ensure compliance with the recent changes to the
CISA. What we try to bring to the table is the information
they need to consider when deciding
on their fund business strategy going forward.
In Switzerland, it is difficult to know the exact
amount of increased costs that local asset managers
distributing their funds in the EU will likely
face. We anticipate that there could be a number
of mergers between small and medium-sized
players. Other managers may even choose to cease their
activities or change their business model altogether.
The private distribution of foreign funds to Swiss qualified
investors, which is subject to a licensing requirement
under the revised CISA, presents BNP Paribas Securities
Services in Zurich with new business opportunities.
Except for distribution activities limited to regulated
financial intermediaries, a Swiss representative as well as
a paying agent needs to be appointed. As the representative
and paying agent for around 1,800 foreign funds, we
believe we can reinforce our status as a market leader.
We have already seen an influx of new customers, allowing
us to assert our role as a partner of choice for fund
managers domiciled abroad.
In addition, we can demonstrate that we’re positioned
to provide the value that our expertise and geographical
presence has been bringing to the market. We’re able to
provide depository services in key European markets but
we also cover the needs of non-EU funds, which require
this type of service if they are going to be set up or distributed
here. As we have the experience and expertise
SERVICE PROVIDERS MUST
BE ABLE TO INFLUENCE,
UNDERSTAND AND
ANTICIPATE MARKET
CHANGES IN ORDER TO
DELIVER THE EXPERTISE
AND SOLUTIONS THAT
MEET MANAGERS’
EXPECTATIONS
”
in servicing regulated funds, we have been able to develop
specialised solutions which respond to the needs
of hedge funds, funds-of-hedge-funds or private equity
managers.
Our goal is to assist asset managers in navigating and
dealing with the new requirements. One of our key solutions,
targeted at hedge fund managers, has been offering
financing to fund-of-hedge-fund managers. Since 2010,
we have offered this service on a very pro-active basis to
existing and new hedge fund managers who use us as a
depository bank in different domiciles.
The take-up has been very good and extremely well
received, which has led us to adapt the servicing model
to include other types of structures, such as single-managed
funds, which were historically managed by prime
brokers. In preparation for the AIFMD, we have developed
solutions which incorporate what a prime broker
would do in terms of financing, to meet the needs
of a single manager when it comes to the requirements
from a depository standpoint.
CHANGES FOR THE BETTER
There is a consensus that the Swiss alternative
fund managers will have to adapt to the new
regulatory environment and be ready for the
AIFMD if they want to demonstrate to their
clients that they are abiding by the rules. The
success of implementation will very much be
governed by investors’ behaviour as well as
the process through which the AIFMD is introduced.
We have observed that since the financial
crisis, high-net-worth individuals (HNWIs)
have been less inclined to invest in hedge
funds. Overall, Swiss investors continue to
look for performance and greater returns. So
far, the perception, particularly in the hedge
fund space, is that managers have not always
delivered.
When considering the upcoming changes in
the EU that will impact AIMs, we believe that
the AIFMD has the potential to be as successful as the
Undertakings for Collective Investment in Transferable
Securities (Ucits) directives. The AIFMD will
establish a strong European standard for alternative
funds, which was largely absent before. The changes
to the Swiss CISA, and aligning the market to the EU
from a regulatory standpoint, will enable Swiss asset
managers to continue to have access to the key European
markets when it comes to domiciling or distributing
their products. The key will be to ensure that the
trust levels of the investors and stake-holders return.
If the process, in particular the introduction of the
AIFMD, is well-managed, then a Ucits-style success
story can definitely be repeated in the future. Similar
to Ucits, there is now an opportunity to implement a
standard for alternative investment funds that could
become a worldwide reference for investors and regulators.
This could be important for Switzerland as an
alternative fund manager domicile if it enables them
to develop more investment products and win back
the business and investor confidence.
20 HFMWEEK.COM

SWITZERLAND 2013
FINANCIAL SERVICES
NEW RULES FOR THE
DISTRIBUTION OF HEDGE
FUNDS IN SWITZERLAND
WITH SWITZERLAND NO LONGER OFFERING ONE OF THE MOST LENIENT REGIMES FOR THE PLACEMENT OF AIFS DUE TO RECENT REGULATORY CHANGES,
DR GUENTHER DOBRAUZ-SALDAPENNA AND DIETER WIRTH OF PWC ZURICH PROVIDE A GUIDE TO HELP NAVIGATE THESE UNCHARTED WATERS
Dr. Guenther
Dobrauz-
Saldapenna
heads PwC Zurich’s Asset
Management Regulatory
practice. Previously, he
practised with Deloitte and
as an attorney. For a number
of years he also served as
legal counsel to a VC/PE firm
and an international hedge
fund. He also lectures on
alternative investment law
and is co-founder of the
Swiss Strategies Group.
Dieter Wirth
is a partner in PwC Zurich’s
Tax and Legal practice and
the Asset Management
Industry Leader of PwC
Switzerland. He is an
attorney-at-law, a Swiss
certified tax expert and a
board member of the Swiss
Private Equity & Corporate
Finance Association (SECA).
On 1 March 2013, the partial revision of the
Swiss Collective Investment Schemes Act
(CISA) and its accompanying ordinance
(CISO) entered into force. With these
new regulations, Switzerland has not only
aligned its licensing regime with AIFMD
requirements by extending them to include AIFMs of foreign
AIFs, but has also brought its distribution rules closer
to MiFID standards. Until now, Switzerland offered one
of the most lenient private placement regimes in Europe.
This has now changed.
The concept of “public promotion”, which was previously
a decisive factor (as long as
one did not publicly advertise AIFs
and only approached qualified
investors by typical private placement
means, one was more or less
free to act), has been replaced by
the more extensive “distribution”
concept as a key criteria for regulating
the offering of AIFs, and the
rather broad definition of “qualified
investor” is now considerably
narrower. High net-worth individuals
(HNWIs), who were previously
defined solely by their net
worth but otherwise did not have
to attest to having any specific investment experience, are
no longer automatically “qualified”.
Similarly, discretionary asset management clients of
supervised asset managers or independent asset managers
only qualify under specific conditions. This essentially
means that the qualified investor category now only comprises
supervised financial intermediaries (e.g. banks, securities
dealers, fund management companies, regulated asset
managers and central banks), supervised insurance companies,
public entities and retirement benefits institutions
with professional treasury operations, as well as companies
with professional treasury operations. HNWIs can opt to be
treated as qualified investors (Opt In) but they must explicitly
declare this in writing and also prove that, at the time of
investment in an AIF, they either have assets of at least CHF
500,000 and sufficient knowledge to assess the investment’s
risk based on their education and professional experience or
comparable experience in the financial sector, or that they
have assets of at least CHF 5m at their disposal. In the latter
THE CONCEPT OF “PUBLIC
PROMOTION” HAS BEEN
REPLACED BY THE MORE
EXTENSIVE “DISTRIBUTION”
CONCEPT
”
case, the required assets of CHF 5m may also include real
estate holdings of up to a maximum of CHF 2m in net value
(market value less any mortgage on the property). Asset
management clients of supervised financial intermediaries
or independent asset managers also qualify, provided they
have not opted out (“Opt Out”).
Additional qualitative requirements at the product-specific
level now apply to those who actively distribute AIFs
to qualified investors other than insurance companies and
the supervised financial intermediaries listed above. Most
notably, the distributor has to be licensed and supervised
for such activity either in Switzerland or in his or her country
of domicile (provided adequate
and recognised supervision is in
place there), and a Swiss representative
and Swiss paying agent for the
AIF must be appointed. In contrast
to a Ucits fund, an AIF product not
eligible for public distribution in
Switzerland does not require Swiss
Financial Market Supervisory Authority
(Finma) authorisation.
It is also important to note that
the purchase of alternative investment
funds by regulated or independent
asset managers for inclusion
in the portfolios of clients with
whom they have entered into a written discretionary asset
management agreement is not considered distribution and
consequently the outlined qualitative criteria at the product
level do not apply. In the case of an independent asset
manager, it is also required that the manager, in his or her
capacity as financial intermediary, is subject to the provisions
of the Swiss Anti-Money Laundering Act and bound by an
industry association’s code of conduct recognised by Finma
as minimum standard, and that the discretionary asset management
agreement also complies with an industry association’s
guidelines recognised by Finma as minimum standard.
Stricter obligations apply as well to the information that
must be provided to investors about any type and amount
of commissions or other monetary benefits received in connection
with the distribution of AIFs. As of 1 January 2014,
new point-of–sale due diligence requirements will apply in
Switzerland. Any distribution activity will trigger the duty to
take minutes as well as record the reasons and recommendations
that have led to an investment in AIFs.
HFMWEEK.COM 21

SIGNINA CAPITAL AG
Structured Asset Management
We are an Independent Asset Manager focusing on niche investment
strategies such as short-term interest rate trading, convertible bonds and
water infrastructure.
We operate regulated fund platforms in Luxembourg and Liechtenstein
and we offer transparent tailor-made solutions to fund managers and
investors.
We perform full in-house Portfolio Management, Risk Management,
Middle- & Back Office and Compliance functions.
Signina Capital AG
info@signinacapital.com
www.signinacapital.com

SWITZERLAND 2013
LEGAL
THE IMPACT OF THE SWISS ACT
ON INVESTMENT FUNDS
WITH THE SWISS LEGISLATOR IMPLEMENTING FURTHER REGULATION, ANITA SCHLÄPFER OF SCHELLENBERG WITTMER EXAMINES THE IMPACT
THIS WILL HAVE ON THE MANAGEMENT AND DISTRIBUTION OF OFFSHORE HEDGE FUNDS
Anita Schläpfer
is a partner in Schellenberg
Wittmer’s Banking and
Finance Group and focuses
on collective investment
schemes, lending
transactions and financial
services regulation. In
particular, she advises on
the structuring, licensing
and distribution of, and
the asset management for,
on- and offshore funds,
including hedge funds.
Switzerland was well-known for its light regulation
of asset managers and its lean private
placement regime. On 1 March 2013, important
revisions to the Swiss Federal Act on
Collective Investment Schemes (CISA) and
the implementing regulations entered into
force. The main goals were to strengthen investor protection
and to ensure the competitiveness and the quality of
the Swiss asset management industry. For this purpose,
the Swiss regulation was aligned with the European Alternative
Investment Fund Managers Directive (AIFMD).
The legislation process was controversial. The outcome
is a Swiss compromise – not as obstructive as the original
proposals of the Federal Council, but still affecting managers
and distributors of offshore hedge funds considerably.
LARGER SWISS OFFSHORE HEDGE FUND MANAGERS NOW
SUBJECT TO THE CISA
Previously, Swiss managers of offshore hedge funds could
operate without a licence and/or prudential supervision
by the Swiss regulator, the Financial Market Supervisory
Authority (Finma). These managers (if they took investment
decisions at all) only had to comply with Swiss antimoney
laundering regulation.
These liberally regulated days have now passed. Asset
managers (but not true investment advisors) of offshore
hedge funds generally require a Finma licence and are
subject to ongoing supervision from the regulator. Closely
replicating the AIFMD, an exception applies for asset
managers of funds available only for qualified investors if
the following de minimis thresholds are met: (i) the fund
assets under management (AuM), including those resulting
from using leverage, do not exceed CHF100m, or (ii)
the AuM of fund of funds, where the underlying funds are
unleveraged and closed-ended for a period of five years, do
not exceed CHF500m.
LICENSING REQUIREMENTS AND ONGOING OBLIGATIONS
To obtain (and keep) the Finma licence, hedge fund managers
must, among others:
maintain a minimum nominal capital of CHF500,000
and a minimum equity capital (generally ¼ of the
fixed cost plus, unless a professional liability insurance
is in place, 0.01% of the total fund AuM);
have in place internal regulations and an appropriate
business organisation ensuring compliance with
the statutory obligations. This translates into, among
others, (i) detailed rules regarding board of directors,
management and corporate documents and guidelines,
(ii) an obligation to establish an adequate risk
management, internal control system and compliance,
separated functionally and hierarchically from
the operational business units, and (iii) the duty
to inform the Finma about any foreign subsidiary,
branch or representative office;
have board and management members and holders
of a qualified participation (mainly 10% or more of
the manager’s capital or voting rights) that meet certain
personal qualifications; and
upon request of the Finma, comply with the regulator’s
recognised rules of conduct promulgated by an
industry organisation.
The asset manager has to ensure the portfolio and risk
management for the funds it manages and may perform
certain other services, e.g. investment advice, fund distribution
and representation of foreign funds. A delegation
of tasks is, subject to conditions, permissible. Finally, additional
obligations apply, in particular the duty to inform
about costs levied on the investors and about distribution
commissions.
DISTRIBUTION INSTEAD OF PUBLIC ADVERTISEMENT
Under the previous private placement regime, activities
which did not fall under the definition of “public advertisement”
were exempted from regulation. This regime has
been abandoned. Instead, all activities qualifying as “distribution”
in the sense of the revised CISA are “in scope” and
different rules apply for distribution to qualified and nonqualified
investors. Coming into effect on 1 June 2013, the
definition of qualified investors will also change.
“Distribution” is defined as any offer or advertisement
for collective investment schemes not exclusively directed
towards supervised financial intermediaries and supervised
insurance establishments (Supervised Institutional
Investors). The term “distribution” does, among others,
not include the providing of information and offering of
funds (i) at the investor’s own initiative (reverse solicitation)
and (ii) within the framework of a written asset management
agreement between the investor and supervised
financial intermediaries or, subject to conditions, independent
asset managers.
NEW QUALIFIED INVESTOR DEFINITION
Wealthy individuals are only qualified investors if they
declare in writing that they want to be qualified investors
(opting-in). They must either (i) show evidence that they
have liquid assets of least CHF500,000 and experience in
the financial sector or (ii) confirm in writing that they own
HFMWEEK.COM 23

SWITZERLAND 2013
LEGAL
the distributing foreign financial intermediary and
the Swiss representative need to sign a distribution
agreement; and
as of 1 January 2014, all parties involved in the distribution
must take, and provide to investors, minutes
on the investor needs and investment recommendations.
In contrast to the first draft of the revised CISA, neither
a Finma distributor licence nor a Finma product authorisation
is necessary for foreign hedge fund distributed
to qualified investors. This is good news because offshore
hedge funds are typically set up in jurisdictions that do not
meet the standards necessary for the Finma authorisation.
MANAGERS AND DISTRIBUTORS
OF OFFSHORE HEDGE FUNDS WILL
HAVE TO ADAPT TO THE REVISED
SWISS REGULATION SOON OR
EVENTUALLY CLOSE THEIR SWISS
OPERATIONS
”
qualifying assets of at least CHF5m. Conversely, asset management
clients of supervised financial intermediaries and
certain external asset managers may declare in writing that
they do not want to be qualified investors (opting-out).
Public-law bodies, pension institutions and enterprises
with professional treasury (Non-Supervised Institutional
Investors) as well as Supervised Institutional Investors
(newly including fund managers and central banks) continue
to be qualified investors.
MARKETING OF OFFSHORE HEDGE FUNDS TO CERTAIN
QUALIFIED INVESTORS NOW SUBJECT TO THE CISA
Marketing activities in Switzerland directed towards Non-
Supervised Institutional Investors and/or wealthy individuals
being qualified investors are now “in scope” of the
CISA. As a result:
a foreign financial intermediary distributing foreign
funds needs to be accordingly authorised in its
home jurisdiction;
a Finma-licensed representative and a Swiss paying
agent must be appointed;
ACTIONS REQUIRED AND DEADLINES
Asset managers of offshore hedge funds that are newly
subject to the revised CISA (and do not qualify for a de
minimis exemption) must announce themselves to the
Finma before 1 September 2013, meet the capital and
organisational requirements before 1 March 2014 and
submit a license application to the Finma (and comply
with the remaining statutory conditions) before 1 March
2015. Until then, market players should also review their
offshore fund structures involving offshore asset managers
(who are supposedly taking investment decisions) and/
or Swiss advisory companies (who are supposedly only
providing investment advice) from a regulatory and tax
perspective. Unless there is sufficient substance offshore
and an appropriate fee flow, the Finma will no longer accept
these structures but require the Swiss “advisor” to
be licensed. Naturally, onshoring the asset management
would negatively affect the tax situation of the managers.
For foreign hedge funds distributed in Switzerland to
Non-Supervised Institutional Investors and wealthy individuals,
the new conditions must also be met before 1
March 2015. Wealthy individuals not complying with
the new prerequisites until the end of May 2015 will be
prohibited from making investments in hedge funds for
qualified investors. Finally, the relevant financial intermediaries
and independent asset managers must inform their
asset management clients of their right to opt out as of 1
June 2013.
QUO VADIS?
Managers and distributors of offshore hedge funds
will have to adapt to the revised Swiss regulation soon
or eventually close their Swiss operations. In particular,
hedge fund managers with operations that are not
personnel-intensive, such as those utilising automated
trading strategies, may find the licensing conditions
onerous and also superfluous, to the extent that
their offshore structures have no connection to the
EU whatsoever, and are thus outside of the AIFMD’s
scope. Even in these cases the new Swiss rules apply.
At the same time, complying with these rules is not
sufficient to ensure access to the EU investor base.
Nevertheless, Switzerland remains an attractive place
for managing and distributing offshore hedge funds,
especially for those market players who are able and
willing to bear (or shift to the investors) the rise in
compliance costs. These costs will increase in other
jurisdictions as well.
24 HFMWEEK.COM

SWITZERLAND 2013
FUND SERVICES
SWITZERLAND: ONE
DOMICILE, A WORLD OF
OPPORTUNITIES
ANDRÉ VALENTE, HEAD OF UBS FUND MANAGEMENT (SWITZERLAND), EXPLAINS WHAT HE SEES AS THE OPPORTUNITIES PRESENTED BY THE
IMPLEMENTATION OF THE ALTERNATIVE INVESTMENT FUND MANAGEMENT DIRECTIVE FOR SWITZERLAND
André Valente
has the overall responsibility
in managing and
developing the Fund
Services business for UBS in
Switzerland. He is head of
the UBS Swiss Management
Company. He has over 30
years of investment industry
experience. André is married
and has three children.
HFMWeek (HFM): How do the various regulatory
changes – such as the Swiss Fund Law and the Alternative
Investment Fund Managers Directive (AIFMD)
– impact UBS?
André Valente (AV): If you take the recently revised Swiss
fund law, it clearly provides some new business opportunities
within Switzerland for larger service providers such as
UBS. Unlike smaller companies, who may find some of the
supervisory requirements a restrictive burden, we are already
fully regulated and have already implemented a solid
risk framework to support our business, thus ensuring that
the new regulations will not have a
significant impact on our business.
The new regulations will allow
pension funds and insurance companies
to create their own fund
structures with the possibility of
sub-delegating asset management
functions under certain conditions.
This illustrates how the legal
changes create opportunities for a
large and experienced service provider,
such as UBS, to create tailormade,
customised fund solutions
for large institutional clients.
Of course, the changes to
Swiss law were pre-empted by the
AIFMD and have already come
into effect with a transition period.
The AIFMD itself is coming into
effect in July 2013, with a transitional
period, and the implementation
of the AIFMD “passport” for
Switzerland as a non-EU domicile
will only be applicable from 2015 at the earliest.
This means there is a degree of uncertainty among managers
and service providers at the moment – we don’t really
know the full extent of the impact the AIFMD will have
on the Swiss industry although the signing of the cooperation
agreement between the European Securities and
Markets Authority (Esma) and the Swiss Financial Market
Supervisory Authority (Finma) has mitigated some of the
immediate concerns.
LEGAL CHANGES CREATE
OPPORTUNITIES FOR A
LARGE AND EXPERIENCED
SERVICE PROVIDER, SUCH
AS UBS, TO CREATE TAILOR-
MADE, CUSTOMISED FUND
SOLUTIONS FOR LARGE
INSTITUTIONAL CLIENTS
”
We are hopeful there will continue to be opportunities
within the next two years but at the same time, we must
bear in mind that certain European markets are not always
easily accessible to third-country funds. Larger asset managers
such as UBS have branches and networks within
various European countries and this will help meet the requirements
of the directive as well as the implementation
of any additional local rules.
HFM: How do you assess the future of the alternative
administration business in Switzerland?
AV: Switzerland has a rich asset
management pedigree with a very
long tradition, portfolio managers
are highly educated, multi-lingual
and specialised in this space. The
asset management industry is becoming
more of a focus for European
banks – it is becoming a core
business. We think that the government
and regulators will have
to support the industry within the
next few years with innovative but
adequate regulations to help Swiss
managers position themselves in
the global market. This clearly impacts
administration businesses
and we feel UBS is leading the way
in this regard.
There are more than 400 alternative
asset managers in Switzerland,
who are either Swiss-domiciled
managers or foreign-domiciled asset
managers who have relocated
to Switzerland. They focus on offshore products and very
often use specialised providers.
UBS believes that there is an opportunity for us as the
leading Swiss provider, and based on our breadth of expertise
servicing alternative products in other locations,
to serve these managers from Switzerland. We feel that
the alignment of Swiss and European regulations makes
Switzerland an interesting market to develop an alternative
business and we are very optimistic about the oppor-
HFMWEEK.COM 25

SWITZERLAND 2013
FUND SERVICES
tunities we will have in Switzerland to support this local
alternative fund industry.
Zurich, Switzerland
HFM: What are the advantages of using UBS Fund Services?
AV: UBS has a strong global footprint and is a global organisation;
we have administrative branches in Canada,
the Cayman Islands, Ireland, Jersey, Luxembourg, Singapore,
Switzerland and the US, and can leverage this expertise
for the benefit of our clients. From Switzerland, we can
be both a local point of contact for managers as well as a
gateway to the wider UBS network. We feel that for hedge
fund managers, having a close geographical partner with
flexible language capabilities is crucial. Fund administration
is one of our core activities – as of 31 December 2012
we administered fund assets of approximately $448bn
($131bn of which is in the alternatives space). We have a
long tradition and solid record in the fund of hedge funds
space, which gives us a big advantage for the benefit of our
clients.
HFM: How can UBS support asset managers in their
adjustment to the AIFMD?
AV: There is an increasing convergence between the traditional
and alternative worlds. Asset managers are facing
more stringent requirements in terms of governance and
transparency, we can use our expertise to help bridge this
gap. Our service model is quite flexible and we have a range
of AIFMD operating solutions in Luxembourg and Dublin
as well as similar solutions in Switzerland with respect to
domestic structures. We can help guide asset managers
through the various regulatory requirements in Europe to
ensure they are AIFMD-compliant as well as meeting the
Swiss requirements when applicable. Additionally, we can
act as a representative and local contact within Switzerland
THE NEW REGULATIONS, BY GROUNDING THE ASSET
MANAGEMENT INDUSTRY IN SUCH CLEAR, CONSISTENT
RULES, WILL MAKE SWITZERLAND WATER-TIGHT IN
TERMS OF ITS LOCATION AND QUALITY
”
to ensure the swift and proper distribution of non-Swiss
products. We have a specialised and dedicated team of staff
– from legal to accounting – which can be utilised according
to the needs of the client.
HFM: What are the advantages and disadvantages of
alternative asset managers being situated in Switzerland
in view of the upcoming regulatory changes?
AV: The Swiss market has a huge attraction as a distribution
channel, particularly as it has a very large pension
fund industry and network of institutional investors. The
industry is extremely mature and well developed – it is a
sophisticated space. Given factors such as its monetary
and political stability, we feel it will continue to attract new
managers within the next few years.
Nonetheless, there are still some areas where improvement
is needed to ensure that the country becomes a top
choice as an alternative investment domicile. The Swiss
regulator, Finma, and the laws governing the creation and
establishment of alternative assets and hedge funds, are
still very strict. Additionally, we feel that many banks are
not fully prepared or fit to deal with alternative products,
especially when it comes to their custodian functions.
The Swiss Fund Association has recently changed its
name to become the Swiss Fund and Asset Management
Association, clearly showing its renewed focus on the asset
management industry – we see that as a positive development.
The new regulations, by grounding the asset
management industry in such clear, consistent rules, will
make Switzerland water-tight in terms of its location and
quality; this is good for clients and will improve the domicile’s
reputation and attractiveness.
Before the financial crisis, we began to see a strong
push among investors towards alternative asset classes.
Although it came to a halt following the crisis, we believe
that as banks begin to look for new revenue sources and
develop more business opportunities, the alternative industry
is beginning to look like a more attractive proposition
especially given global growth of hedge fund industry
assets in excess of $2.25trn according to recently published
statistics.
Investors are also looking to diversify their portfolios
again, if the Swiss banking industry can adapt in terms of
their custody and prime brokerage offerings for alternative
products, then they can satisfy investor requirements. As
these changes take place, UBS will continue to be at the
forefront of the alternative asset industry as an active service
provider and thought leader to the industry.
26 HFMWEEK.COM

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t: +44 (0)1481 748955
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BY WILL WAINEWRIGHT
03
03
SUBSCRIBE TO
THE BEST
READ IN THE
HEDGE FUND
INDUSTRY
Institutional investors flock
to low-fee offering from
UK-based manager
BY MATT SMITH
www.hfmweek.com
NEWS 05
INVESTOR 03
Lone Pine and Appaloosa
stars generate combined net
gains of nearly $8bn last year
BY TONY GRIFFITHS
www.hfmweek.com
NEWS 05
INVESTOR 08
LAUNCH 09
Mandel and Tepper
most profitable
managers of 2012
DIRECTORS'
GUILD
THE LATEST ON THE
CONTINUING DEBATE
ABOUT HEDGE FUND
GOVERNANCE
The long and the short of it ISSUE 294 7 March 2013
AIFMD REBELS DECIDE AGAINST FORMALISING OBJECTIONS
Germany and UK had led backlash against EU Commi sion
KERN COUNTY MAKES DEBUT HIRES AND CONTINUES SEARCH
Pension se to a locate to managed futures and long/short space
NEW YORK LAUNCH NAMED WITH ‘LONDON WHALE’ IN MIND
Charlie Smith’s Mast-Head begins trading with a locations of $4m
beta drivers giving absolute
return”, the source said.
Furthermore, RMPP has
additional capital to put to
work in the hedge fund space
and more hires are likely to be
THE ROYAL MAIL Pension on the cards going forward, a
Plan (RMPP) has made its number of people within asset
debut steps into the hedge management firms who are
fund space by a locating to familiar with the matter told
five absolute return managers,
HFMWeek can exclusively RMPP used to be one of the
HFMWeek.
reveal.
top ten largest pension schemes
The UK pension has distributed
$100m across five single ($45.6bn) in assets under man-
in the UK, with £30.68bn
manager firms and was assisted agement across 13 asset managers,
including BlackRock,
in its selection by Albourne
Partners, according to a source Hermes and Standard Life, as
with knowledge of the matter. of 31 March 2012.
The managers were hired However, the scheme has
across a number of key investment
themes, including rein-
end of March 2012,
since shrunk to just $3bn a the
surance, and are “diversified when RMPP was
LAUNCH 09
British institution invests in
five managers with further
mandates on the cards
BY KIRSTIE BREWER
Cantab macro fund
raises $400m in
month since launch
his Lone Pine strategy’s historical
total to $15.3bn and into
the overa l top ten, followed by
Tepper on $3.3bn, up to $17bn.
Tepper’s rise to fifth in the
historical gains list means he
STEVE MANDEL, founder leapfrogs Alan Howard’s Brevan
of Lone Pine Capital, and Howard Fund, which slipped a
Appaloosa Management’s place after net gains of $800m
David Tepper were the most saw its total creep up to $16.5bn.
profitable money managers However, the European giant
of 2012, making nearly $8bn – and the continent’ sole representative
within the study
between them for their investors,
new research suggests. – remains home to the most
The two US heavyweights profitable fund on an annualised
basis, having now averaged
– profiting largely from equity
trades – were the biggest risers
in the latest annual Greatest since its 2003 inception.
a net gain of $1.65bn per year
Money Managers list from LCH Other firms to produce particularly
impressive net gains for
Investments NV.
The research study estimated investors last year included list
total 2012 net gains after fees stalwarts Tom Steyer
for Mandel at $4.6bn, boosting at Fara lon ($2.2bn),
Royal Mail makes
first allocations to
hedge funds
FEATURE 17
PROP PROGRESS
The long and the short of it ISSUE 295 14 March 2013
FUNDS FACE ‘MASSIVE BATTLE’ OVER UCITS V BONUS LIMIT
Directive amendment had been considered a tactical ploy
TEXAS ERS ALLOCATES $80M ACROSS TWO EQUITY FUNDS
System also makes two new hires for hedge fund capabilities
ELANUS RAISING CAPITAL FOR BANKING FUND FOLLOW-UP
GBO Fund I available to onshore and o fshore investors
NEWS 05
INVESTOR 08
LAUNCH 09
Is the pipeline of prop desk spin-outs
beginning to run dry? HFMWeek
maps launch activity to date
www.hfmweek.com
FEATURE 18
COMMENT THE P OWER OF DEP OSITARIES POST-AIFM D 14
HOT
COMPETITION
s in d 1 05/03/2013 16
HFMWeek presents the fi ndings of a
new survey of the COOs at some of
the UK’s biggest hedge fund fi rms
COMMENT WHAT SHADOW ADMINISTRATION REALLY MEANS 14
001_003_HFM295_News2.indd 1 12/03/2013 17:02
days. We are very pleased about
that,” Cantab’s founding partner
and CEO Dr Ewan Kirk told
HFMWeek sister publication
CTA Intelligence in an interview
this week.
UK-BASED CANTAB Capital According to Kirk, the offering
has received serious atten-
Partners has raised $400m in
its new low-fee macro fund, just tion from institutional investors.
“Probably 75% of the ini-
over a month since it launched
at the start of February, tial investment has come from
HFMWeek has learned.
very significant global institutions,”
he said.
The roughly $5bn systematic
global macro manager, headquartered
in Cambridge, UK, CCP Quantitative strategy
Cantab closed its flagship
opened the CCP Core Macro to new investors at the end of
Fund to external investors on 1 last year after nearly trebling its
February, with 0.5% and 10% AuM over 12 months to $4.7bn.
fees, compared to the hedge fund The firm was allocated
industry’s traditional ‘2 and 20’. $200m by the $126bn New
“There are very few firms that York City Retirement Systems,
launch new funds with nearly HFMWeek exclusively
half a billion dollars, nowa-
revealed last month.
HEDGE FUNDS COMPETE
FOR THEIR SLICE OF THE
UK PENSION POT
The long and the short of it ISSUE 296 21 March 2013
ASSETS AT KEITH MEISTER’S CORVEX SURGE PAST $2BN
Icahn’s protégé enjoys impressive first two years in business
WYOMING PENSION POISED TO ALLOCATE UP TO $550M
System to issue RFPs for long/short equity and credit funds
CONCERTO ORCHESTRATES EVENT DRIVEN CREDIT FUND
Women-owned manager wi l debut fund in third quarter
Portfolio manager’s plans
generating excitement
among industry sources
03
FEATURE 16
TRANSATLANTIC
AMBITION
www.hfmweek.com
Can J.P. Morgan replicate its US
success in Europe? David Clarkson,
head of Emea, thinks it can
FEATURE 18
The long and the short of it ISSUE 297 28 March 2013
IRENE TSE SECURES $70M IN COMMITMENTS FOR FIRST FUND
Industry veteran set for New York launch later this year
OHIO PENSION SEEKS HEDGE FUNDS FOR $1.1BN ALLOCATION
System already has $3.6bn invested across 25 managers
TWO US START-UPS WIN BACKING FROM PALOMA
Firm funds new project from former Diamondback trader
FEATURE 18
COMMENT DECISION MAKING? SHOW U S THE EVIDENCE 14
Millennium veteran to break
NEWS 06
INVESTOR 08
Abush to spin out
from Millennium’s
Waterfront unit
LAUNCH 03
MUTUAL
BENEFITS
THE ADVANTAGES OF
PARTNERING IN THE WORLD
OF ALTERNATIVE MUTUAL
FUNDS
FEATURE 17
RENAISSANCE
MAN
HFMWEEK ANALYSES THE
LEGACY OF OUTGOING
LANSDOWNE PARTNERS
CEO PAUL RUDDOCK
19/03/2013
FEATURE 17
away and it is not known whether
his old employer will provide
seeding.
MILLENNIUM Management
portfolio manager Eduardo
Abush has left Israel ‘Izzy’
His plans are creating a buzz
among industry sources, one
Englander’s $18bn firm after
saying it could rank among the
eight years to launch a hedge
US market’s most significant
equity launches this year.
fund of his own, HFMWeek can
exclusively reveal.
Abush has been with
Millennium for a total of eight
Abush’s contract expires at
the end of March but he has
years, the las three of which as a
already left the New York-based
PM at Waterfront. Prior to that,
firm. He led Waterfront Capital
the Stanford business school
Partners, a market-neutral fund
graduate was a senior analyst at
which traded on Millennium’s
Zimmer Lucas, in common with
platform, and is believed to be
several ex-colleagues who joined
planning to go it alone with a
similar vehicle later this year.
Millennium as PMs after working
a the small New York fund.
It's all change at the top in the
latest HFMWeek survey of
He will be the latest
Specific details on team size
and the strategy his new venture
will deploy could
COMMENT JOBS ACT CHANGES: TIME THE CFTC TOOK A STAND? 14
not be obtained, but
managed account platforms
03
001_003_HFM297_News.indd 1
FEATURE 18
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SWITZERLAND 2013
FINANCIAL SERVICES
LIECHTENSTEIN: A JURISDICTION
FOR INFRASTRUCTURE FUNDS
MARTIN KLOECK AND JULIETTE VARTIKAR, OF SIGNINA CAPITAL, EXPLAIN THE ADVANTAGES OF THE LIECHTENSTEIN
JURISDICTION FOR LAUNCHING SIGNINA’S WATER INFRASTRUCTURE FUND
Martin Kloeck
is co-founder and
managing partner of
Signina Capital AG.
Previously he worked for
10 years at UBS where
he developed investment
strategies, worked at two
major hedge funds and
was special advisor for
derivatives and alternative
investments.
Juliette Vartikar
is the project manager at
Signina Capital AG. She
started her career as an
alternative investment
analyst at Cambridge
Associates in Boston in
2007 and joined Signina
in 2012. She has an MBA
from the University of
Oxford and a B.A. from Yale
University.
Infrastructure is a vital topic for future investments
– infrastructure upgrades, new infrastructure and
technical progress across an array of fields are inevitable.
The current challenges of the financial and
regulatory environment provide excellent opportunities
for savvy investors, but can sometimes create
obstacles for traditional infrastructure funds. At Signina
Capital we addressed these challenges by launching the
domicile of our water infrastructure fund in Liechtenstein.
THE CASE FOR WATER INFRASTRUCTURE
Signina Capital is an advisor in the water infrastructure
space. In terms of the broad opportunity we see, it has
been largely established that water’s
global supply/demand balance
is deteriorating – hastened
by pollution, population growth
and industrialisation, among other
macro environmental factors. To
meet the growing need for water,
capital expenditure on water infrastructure
is expected to grow
to $131bn by 2016 from $90bn in
2010.
From a financial and investment
perspective, it has been shown that
current governments are largely
unable to finance the required
water infrastructure projects, and
the normal credit avenues are thin.
As such, private investors have
a unique opportunity to finance
these long-term, stable projects,
and investors will profit from current
low price levels.
SIGNINA CAPITAL WATER
INFRASTRUCTURE INVESTMENTS
Signina Capital’s Water Infrastructure Fund obtained a
$500m advisory mandate from a German institutional entity
for investment into water infrastructure over a 20-year
period. Our mandate has a strong focus on cash yields in
the range of 7-9% p.a.
Water infrastructure is defined as hydropower, filtration,
desalination, water treatment and utility infrastructure.
Our geographic focus is the US, Canada, UK, Gibraltar,
and Bahamas due to the stability of governmental
AT A CERTAIN INVESTMENT
SIZE THE INVESTOR IS ABLE
TO CHOOSE THE PROJECT
SPECIFICALLY, RATHER
THAN INVESTING INTO A
GENERAL PORTFOLIO. THE
INSTITUTIONAL CLIENT CAN
HAVE A FULL INSIGHT INTO
THE TRANSACTION
”
water laws. Counterparties are municipalities, US state
governments, and PPP-related companies, which can be
checked through similar projects and external specialists,
and have stable financial ratios and clear capital structures.
In terms of the investment process, unlike in a traditional
infrastructure fund, we provide a clear and disclosed
catalogue of investment criteria that must be documented
before an investment moves forward. Importantly, at a
certain investment size the investor is able to choose the
project specifically, rather than investing into a general
portfolio. In this situation, the institutional client can have
a full insight into all details of the transaction.
As an example of a current deal, we are at present raising
money for a hydropower project
based in Illinois. This lock and dam
hydroelectric water power plant
has obtained the necessary licences
and is currently seeking investment
proceeds to finalise development.
Expected project completion is
Q1 2016 and it is economically
compelling with a power purchase
agreement-secured sale of the energy
produced.
As for our experience and network
in the water sector, we work
with a 30-year, reputable US-based
infrastructure advisor which is
an important partner in our deal
flow and navigating stringent US
regulatory bodies. In addition,
jointly with a leading utility team
in London, we have built a core
investment expertise in the English
water market. Starting in 2003, we
invested directly into companies:
two to three pre-IPO deals in Asia,
privatisation deals in the UK and a combination of infrastructure
and utility corporate finance deals. Signina has
invested approximately $1bn in the water space over a period
of 13 years.
THE LIECHTENSTEIN AIF FOR INFRASTRUCTURE
INVESTMENTS
Our intention was to offer our investors the opportunity
to invest in the water infrastructure theme alongside our
current mandate. For that we looked at various fund ju-
HFMWEEK.COM 29

SWITZERLAND 2013
FINANCIAL SERVICES
FIGURE 1: AN OVERVIEW OF THE SIGNINA CAPITAL FUNDS AGMVK, THE LIECHTENSTEIN SICAV QIF UMBRELLA
INVESTORS
Classified investors
INVESTORS
FUND STRUCTURE
Segregated sub-funds of
Signina Capital AGmvK
(umbrella structure)
Investment Manager
Signina Capital AG
Investment Advisor
External Specialist/Expert (optional)
Signina Captial funds
AGmvK
(SICAV Umbrella)
Audit: PwC
Supervision: FMA
Fund Administration: ValartisFunds
Custodian Bank: ValartisFunds
SC Water
Infrastructure Fund I
(Sub-Fund A)
SC Water
Infrastructure Fund II
(Sub-Fund B)
HOLDING STRUCTURE
Legal structuring of assets
Tax planning
Administrative project levels
Investment Manager
Signina Capital AG
Equity/debt
Project Financing Company
Sub-Fund A
Equity/debt
Project Financing Company
Sub-Fund B
Investment Manager
Signina Capital AG
ASSETS
Infrastructure investments
Project 1
Wastewater: Canada
Project 2
Filtration: USA
Project 1
Hydropower: USA
Project 2
Desalination: Bahamas
risdictions in order to find an appropriate structure for
investments in a regulated environment which offers the
flexibility needed for such unique investments.
In Liechtenstein we found an adequate solution for this
non-traditional investment strategy in the Qualified Investors’
Fund (Qif) in the legal form of a SICAV. It provides a
degree of flexibility that distinguishes it at an international
FOR SIGNINA’S INFRASTRUCTURE FUND STRUCTURE VIA
SICAV VEHICLE, WE HAVE FOUND A STRONG FIT IN THE
LIECHTENSTEIN DOMICILE
”
level from similar structures like the Luxembourg specialised
investment funds (Sifs) or Swiss funds for qualified
investors.
A feature which is especially useful for infrastructure
funds is that the Liechtenstein SICAV-Qif allows a fund
to be implemented with very little diversification, meaning
that the fund would be able to hold one asset, which
is in itself sufficiently diversified as it holds various other
assets. From an infrastructure investment perspective, this
flexibility is crucial as the capital is usually invested in the
actual project via a holding company in the local country
of investment. This is a typical structure and is usually established
to invest capital more efficiently from a tax and
legal perspective.
See an overview of the Signina Capital Funds AGmvK,
the Liechtenstein SICAV Qif umbrella, in Figure 1, above.
This shows schematically how an infrastructure fund
could be structured in Liechtenstein, including the investment
manager (Signina Capital AG), and the administrator
and custodian (both Valartis). The structure is supervised
by the Liechtenstein regulator, FMA, as well as the
auditor (PwC). With this set up, clients can invest via a
fully segregated and ring-fenced investment vehicle.
This is the unique approach we want to provide, as opposed
to a traditional black-box fund portfolio. Through
this set up the investor has a regulated and transparent
investment in a segregated and audited fund, with official
monthly NAVs calculated by an administrator. The Liechtenstein
Qif provides an ideal framework for this.
An additional advantage is the time-to-market. Unlike
other types of structures, the very efficient authorisation
structures in Liechtenstein allow a minimal implementation
period. This means that the time-to-market when
setting up such a fund is merely the time required to produce
the statutory prospectus and have it checked by the
auditors. In a streamlined procedure featuring PwC and
Valartis, currently a sub-fund can be launched within two
or three weeks if all necessary information is available.
For Signina’s infrastructure fund structure via SICAV
vehicle, we have found a strong fit in the Liechtenstein
domicile.
30 HFMWEEK.COM

Valartis Fund Management (Liechtenstein) AG is a 100% subsidiary
of Valartis Bank (Liechtenstein) AG and a member of the Swiss stock
listed Valartis Group AG. With administered assets of more than
2 billion Swiss Francs* within Liechtenstein alone we know wealth
and how to deal with it.
Valartis Fund Management
(Liechtenstein) AG
Schaaner Strasse 27
9487 Gamprin-Bendern
Fürstentum Liechtenstein
Phone +423 388 10 00
Fax +423 388 10 01
info@valartisfunds.li
www.valartisfunds.li
Domiciled in the heart of Europe we are your one-stop shop for
the setup, administration and life-cycle management services of
standardized securities as well as alternative investment funds:
– Fund structuring
– Custody & administration
– Valuations & publications
– Compliance and regulatory services
Offering fund solutions fully in line with the legal directives of the
European Economic Area EEA, taking both advantage of our Swiss
heritage as well as regulated European standards, let us
Go the extra mile. Together.
* Valartis Liechtenstein entities combined

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