F.A.Q - Ermes Wealth Management

The ideal platform for your investment strategy

There are a number of ways asset managers manage their clients wealth. However, handling individual client accounts is not scalable and might become inefficient with an increasing number of clients. Moreover, several investments like Hedge Funds, Real Estate Funds and Private Equity Funds have a high minimum investment amount or restrict themselves only to institutional investors. These are the reasons why many asset managers choose to launch their own investment vehicle. Anyhow the well-known and widespread fund structures are in many cases neither accessible nor suitable due to various limitations, such as several months of launch time, high set up & running costs, poor flexibility, marketing restrictions and regulatory restrictions. Especially for investment vehicles with less than 10 mio Euro AuM a fund structure is not suitable. The alternative that overcomes all these limitations and which has become popular in the last decade is the Actively Managed Certificate (AMC).

Frequently Asked Questions & Answers

Have a look at frequently asked questions & answers to understand more.

What are structured products?

The Swiss Bankers Association has defined structured products in its “Guidelines on Informing Investors about Structured Products” (Investor Information Guidelines) as “investment instruments for which the redemption value is linked to the performance of one or more underlying values. They may have fixed or unlimited maturities and be based on one or more parts, irrespective of weighting”.
According to the Swiss Structured Products Association, “structured products are investment products available to the public whose repayment value derives from the development of one or several underlying assets. Underlying assets are investments such as shares, interest, foreign currency or raw materials such as gold, crude oil, copper or sugar. Structured products are a combination of a traditional investment (e.g. bond) and a derivative financial instrument”.

Under what conditions can structured products be offered in or from Switzerland?

Public offering

According to art. 5 CISA, structured products may only be offered publicly in or from Switzerland if they are issued, guaranteed or distributed by a Swiss bank, a Swiss regulated insurance company, a Swiss regulated securities dealer or a foreign institution subject to equivalent standards of supervision.

Private placement

An offering of structured products is not deemed to be public (private placement) and, as a result, the rules of art. 5 CISA do not apply, if the products are offered exclusively to qualified investors by means considered usual for this type of business (art. 3 CISO).

Qualified investors are defined in art. 10 para. 3 CISA and consist of regulated financial intermediaries (such as banks, securities dealers and fund management companies), regulated insurance companies, public entities and social security establishments with professional treasury, high net worth individuals (the threshold has been set at 2 million francs “financial investments”), as well as investors who have entered into a discretionary asset management agreement with a regulated financial intermediary as described above.

The manner in which the qualified investors are contacted also plays a crucial role in determining whether private placement is at hand. Indeed, the qualified investors may only be contacted by means considered usual for this type of business.

What documentation is required or usual for the issuance of structured products for the Swiss market?

Simplified prospectus

A simplified prospectus is required in the cases described above in the section regarding public offerings. According to art. 5 para. 2 CISA, the simplified prospectus must describe, in a standard format, the key characteristics of the structured product, its profit and loss prospects as well as the significant risks for investors. The simplified prospectus must be easily understood by the average investor. It must further indicate that the product is neither a collective investment scheme, nor requires an authorization of the regulator.

Term sheets

Term sheets containing only a short summary of the terms and conditions continue to be used as the main marketing instrument for listed products. Al- though the content of the term sheets is not regulated by law, it is nevertheless imperative to ensure that the investor is provided with accurate information and is not being misled, in particular with respect to the risks entailed by the relevant type of investment. It is usual to draw the attention of the investor at least on the specific product-related risks as well as on the issuer risk. Some issuers of both listed and unlisted products are now using the information re- quired in the simplified prospectus also for the term sheets regarding unlisted products. It is likely that this trend will become more and more usual and, in the long term, become the norm.

Can structured products which comply with Swiss regulations be marketed from Switzerland to other countries?

Most product documentation includes selling restrictions into various other countries (as well as to U.S. citizens). The reason for this is that foreign legislation may not allow or only allow the marketing of such products in the relevant country, if certain local requirements are complied with. For example, structured products may only be sold to investors in the European Economic Area, if a prospectus complying with the “EU Prospectus Directive” has been issued or on a private placement basis. In such a case, the relevant private placement rules of the foreign country (and not the Swiss ones de- scribed above) apply. The selling restrictions are intended to reduce the risk that breaches of foreign law take place.

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