Switzerland rolls out the welcome mat for hedge funds

Switzerland's fledgling hedge fund industry is set for growth as the credit crisis forces the industry to focus on lower-cost centers and the country aims to lure managers from London. Lower living costs, as well as better personal tax rates than London in some cantons, improving tax terms for fund firms and a high quality of life are carrots Switzerland is dangling in front of continental European managers based in London.
And as the credit crisis and huge market volatility hit returns in the hedge fund industry, Switzerland looks set to benefit even as the industry shrinks elsewhere as managers facing fee pressure and outflows look for cheaper locations.

"London is still dominant, but we're seeing some activity (new funds) in Geneva," said Mark Lewis, senior investment funds partner at Cayman Islands-based law firm Walkers Global.

"The occasional manager, start-up or transfer of business will be in Switzerland. It's a combination of Switzerland's efforts to win business and the UK government's efforts to lose it."

While about a third of global funds-of-hedge-funds assets are run out of Switzerland, single-manager funds are scarcer because tax for these structures have been less inviting.

Seventy-four firms ran just $15.2 billion in assets - less than 1 percent of the global total - according to a survey in June by ZHAW Center Alternative Investments & Risk Management.

However, the country is rapidly reforming to attract hedge funds and private equity.

The Federal Act on Collective Investment Schemes, which came into force last year, provides the legal and regulatory framework for setting up Swiss-domiciled funds.

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