Types of funds

1. Undertakings for collective investment in transferable securities (UCITS)

(Legal basis: UCITSA, UCITSO)
These are securities funds whose investments adhere to the provisions of the UCITS IV Directive. Within one year of being authorised they must have assets totalling at least EUR 1.25 million or the Swiss franc equivalent (Art. 9 para. 4 UCITSA, Art. 13 para. 2 UCITSO). Funds of this type are characterised by the fact that, following authorisation in Liechtenstein and advance notification to the FMA, they may be distributed publicly throughout the EEA (“single licence” and “European passport”; Art. 97 et seq. UCITSA, Art. 107 et seq. UCITSO). Furthermore, the establishment of so-called “master-feeder structures” is permissible (Art. 60 et seq. UCITSA, Art. 71 et seq. UCITSO). Cross-border mergers of funds are possible (Art. 38 et seq. UCITSA, Art. 62 et seq. UCITSO). The degree of asset diversification required by the investment regulations does not need to be achieved until six months after the formation of the fund, although the precept of risk diversification must be observed in any event (Art. 59 para. 3 UCITSA, Art. 4 in conjunction with Art. 69-70 UCITSO). The fund must be valued at least twice a month in line with normal market practices and international standards (Art. 78 para. 1 UCITSA, Art. 5 UCITSO). In order to strengthen investor protection, with all types of funds the key investor information concerning a given fund must be presented to prospective investors in a clear and generally comprehensible manner, in a standardised summary format and in at least one official language of every country in which the fund is distributed (Art. 80 et seq. UCITSA, Art. 93 et seq. UCITSO).
This type of fund may also be configured as:

• an umbrella fund (Art. 2 para. 2 UCITSA, Art. 2 para. 2 and 3 UCITSO) or
• an index fund (Art. 55 UCITSA, Art. 4 para. 2 UCITSO).

2. Investment undertaking for real estate

(Legal basis: Art. 45-52 IUA, Art. 56-62 IUO)
This fund can be used to invest directly or indirectly in residential or commercial property while having due regard for the principle of risk diversification. The minimum fund volume is CHF 2 million or the foreign currency equivalent, which must be achieved within six months of the initial payment date for subscriptions and must be maintained thereafter (Art. 59 IUA in conjunction with Art. 82 para. 1 IUO). Indirect investments by means of the acquisition of real estate companies or participations in other real estate funds are restricted to an upper limit of 49% of the fund’s assets. In addition, the principle of diversification applies whereby no more than 20% of the fund’s assets (at the time of acquisition) may be invested in a single real estate title. The required degree of diversification does not need to be achieved until two years after the formation of the fund (Art. 60 IUO).

3a. Investment undertaking for other assets

(Legal basis: Art. 42-43 IUA, Art. 51-55 IUO)
This category covers “investment undertakings that are neither investment undertakings for transferable securities nor investment undertakings for real estate” (Art. 42 para. 1 IUA). The minimum fund volume is CHF 2 million or the foreign currency equivalent, which must be achieved within six months of the initial payment date for subscriptions and must be maintained thereafter (Art. 59 IUA in conjunction with Art. 82 para. 1 IUO). This type of fund is subject to only a few restrictions, enabling it to engage in investments that would not be possible for securities funds because of the relatively stringent diversification rules and upper limits on investments laid down by the UCITSA. Funds for other assets may also invest in instruments that offer only restricted marketability, are subject to major price fluctuations, involve limited risk diversification or do not lend themselves readily to valuation. Authorised investments include most notably investments in precious metals, commodities and derivative financial instruments. This means that funds for other assets may in certain circumstances be subject to large price fluctuations and low valuation frequency. The time limits for adherence to investment restrictions are dealt with under Art. 53 para. 2 IUO.

3b. Investment undertaking for other assets with increased risk

(Legal basis: Art. 44 IUA, Art. 54-55 IUO)
These funds have a heightened risk profile compared with normal investment funds for other assets. For instance, they often permit such additional activities as borrowing, the use of derivatives for speculative purposes and short selling. Since there are virtually no regulations governing funds of this type, the prospectus must draw attention to the heightened risk they involve. Moreover, the almost unrestricted freedom such funds enjoy means that special licensing conditions are applied by the Liechtenstein FMA. The minimum fund volume is likewise CHF 2 million or the foreign currency equivalent, which must be achieved within six months of the initial payment date for subscriptions and must be maintained thereafter (Art. 59 IUA in conjunction with Art. 82 para. 1 IUO).

4. Special category: the investment undertaking for qualified investors

(Legal basis: Art. 23 IUA, Art. 28-29 IUO)
A fund for qualified investors is subject to particular restrictions pertaining to the “qualification” of its investors while at the same time offering the greatest degree of freedom with regard to types of investment and the scope of diversification within the fund. When defining the term “qualified investor” there is a presumption of a reduced need for investor protection, with the result that these funds are exempt from certain IUA and IUO provisions. For instance, setting up a fund of this type does not require prior substantive authorisation by the Liechtenstein FMA. A fund for qualified investors is also exempt from the usual obligation to produce a full prospectus and half-yearly reports and from the standard publication rules. Together, these characteristics make it possible to set up a fund of this type very quickly and yet with bespoke features. The minimum fund volume is CHF 2 million or the foreign currency equivalent, which must be achieved within six months of the initial payment date for subscriptions and must be maintained thereafter.

The fund for qualified investors was created as a vehicle that gives institutional investors and experienced private investors the greatest possible freedom to configure an investment fund that is “right” for them. One of the possibilities it offers is the creation of a genuine single investor fund. For this reason it is ideally suited as a master instrument for your own family office.

Further information is available at
Funds for qualified investors