The de minimis rules under the Financial Institutions Act (FinIA) provide asset managers with two key benefits. On the one hand, they allow for a moderate expansion of an asset manager’s business activities. On the other hand—and of particular relevance in this case—they facilitate the launch of regulated activities by new Swiss hedge fund managers handling collective assets during their start-up phase.

When properly structured from the outset and under the right conditions, the Swiss regulatory framework can offer new Swiss hedge funds a reasonable preparation period before applying for a license as a manager of collective assets. This allows for a gradual and organic transformation of internal organization and processes.

To qualify for the de minimis exemption, the total assets under management—including those acquired through financial instruments with leverage—must not exceed CHF 100 million (trading levels may be higher).

1. General Authorization Requirements for De Minimis Asset Managers

A hedge fund seeking authorization in Switzerland must meet several requirements. The license application must include all necessary information and documents for assessment, specifically details on:

• Personal Requirements: Appropriate education and ideally at least 10 years of professional experience in hedge funds, either in Switzerland or abroad. Additionally, individuals responsible for the overall management and administration must demonstrate a reliable track record of sound business conduct and possess a good reputation.

• Financial Requirements: A minimum capital of at least CHF 100,000, ideally up to CHF 500,000, fully paid in cash. Equity capital must always cover at least one-quarter of fixed costs. From the outset, it is recommended that the company be structured as a Swiss stock corporation (AG) or, alternatively, as a limited liability company (GmbH).

• Organizational Requirements: The company’s registered office, as well as (most of) the residences of executive management and board members, must be in Switzerland. Efficient internal processes between portfolio management and back-office/investment control are required. In terms of personnel, an ideal setup includes two executives at the management level and a board of directors with three members, the majority of whom should not be actively involved in daily operations.

2. FINMA Key Requirements for Commencing Business Operations and Obtaining the De Minimis FINMA License

The de minimis exemption applies cumulatively under the following conditions:

• Qualified Investors: All investors in the collective investment scheme whose assets are managed by the hedge fund must qualify as qualified investors as defined in art. 10 (3) or (3ter) of the Swiss Collective Investment Schemes Act (CISA) of June 23, 2006.

• Assets Under Management (AuM) Cap: The total AuM of the collective investment schemes, including assets acquired through the use of leveraged financial instruments, must not exceed CHF 100 million (trading levels may be higher).

3. Reporting Obligation When Exceeding Thresholds

If the hedge fund exceeds the AuM threshold, the following steps must be taken:

• Notification to FINMA: The hedge fund must report the exceedance of the threshold to FINMA within 10 days.

• License Application: The fund must submit an application for authorization as a Manager of Collective Assets to FINMA within 90 days.

As an alternative, the fund may adjust its business model within 90 days to ensure that exceeding the threshold is unlikely to occur again.

4. License Application as a Manager of Collective Assets

To obtain the higher authorization from FINMA, a Manager of Collective Assets must meet the general licensing requirements outlined in art. 7 et seq. FinIA, as well as the following additional conditions:

• Legal Structure: The entity must be incorporated as a commercial company (that's why it is recommended to start under the De Minimis structure with a Swiss AG or GmbH from the outset.)

• Adequate Organization: The firm must have an organizational structure appropriate for its activities.

• Capital and Security Requirements: The entity must hold the minimum required capital and provide additional financial safeguards.

• Defined Business Scope: The company must clearly define the scope of its activities—both substantively and geographically—in its articles of association, partnership agreement, or organizational regulations.

• Management of Collective Assets: The entity must manage at least one collective investment scheme in line with its core purpose.

5. Strategic Considerations for Swiss Hedge Funds

Obtaining a portfolio manager license can facilitate the initial entry into regulated activities for a newly established Swiss hedge fund. If the fund intends to pursue a license upgrade in the future, it is advisable to set up an efficient and scalable organizational structure from the outset, making the transition smoother.

The licensing requirements for Managers of Collective Assets are more demanding, particularly regarding staffing, internal processes, risk management, and corporate governance. These regulatory and operational requirements are generally easier to meet when the firm grows organically.

I am happy to advise you from the very beginning in designing the optimal structure to guide you as smoothly as possible through the applicable Swiss regulatory framework.