Investment funds play a vital role in Swiss private banking and independent wealth management. These vehicles allow investors to pool their capital in order to gain diversified exposure to portfolios managed by professionals. They come in several forms, including equity funds, bond funds, balanced funds, money market funds, and exchange-traded funds (ETFs). Consequently, they offer flexible solutions across asset classes and risk profiles.
In Switzerland, both private banks and independent asset managers (IAMs) include investment funds in discretionary mandates, advisory portfolios, and thematic strategies. As a result, they serve as essential building blocks that combine transparency, liquidity, and efficiency. Their regulated structure provides clients with access to global markets while maintaining operational reliability within Swiss custodial systems.
Types of Investment Funds
- Equity Funds: Focused on listed shares across industries or regions.
- Bond Funds: Invested in fixed-income securities issued by governments or corporations.
- Balanced Funds: Include both equities and bonds to reduce volatility.
- Money Market Funds: Offer high liquidity and low credit risk through short-term instruments.
- ETFs: Track indices with intraday trading, offering lower costs and transparency.
Swiss investors typically hold these funds within bank custody accounts. The selection process focuses on regulatory status, fee structure, and operational compatibility.
UCITS vs NTIP Funds
UCITS (Undertakings for Collective Investment in Transferable Securities) are regulated by European frameworks and widely accepted across Swiss banking platforms. They provide full portfolio transparency, consistent liquidity, and strict investor protection.
NTIP (Non-Transparent Investment Products), such as offshore hedge funds or unregistered share classes, often lack detailed reporting. This creates several challenges. Most importantly, NTIPs generate significantly higher operational costs. Their manual processing leads to delays and reduced compatibility with Swiss custodians. Furthermore, these funds may be limited to qualified investors and require pre-approval from the bank.
| Feature | UCITS | NTIP |
|---|---|---|
| Transparency | Full reporting and daily NAV | Minimal or no reporting |
| Operational cost | Low and standardised | High due to manual reconciliation |
| Liquidity | Daily | Weekly or monthly possible |
| Bank acceptance | Universally accepted | Restricted; often bank-specific |
| Investor profile | Retail and professional | Qualified investors only |
As a result, IAMs and clients must weigh cost, liquidity, and accessibility before including NTIPs in portfolios.
Benefits of Investment Funds
- Diversification: One fund can access dozens or hundreds of securities.
- Accessibility: Available to investors of all sizes with transparent pricing.
- Liquidity: Most UCITS allow for daily dealing and settlement.
- Expert management: Teams of analysts and PMs manage capital with clear mandates.
- Regulation: Funds operate under well-established legal frameworks.
Risks and Considerations
- Market exposure: The NAV fluctuates with underlying asset prices.
- Fee structure: Total expense ratios vary and may reduce net performance.
- Tracking risk: Passive ETFs may not perfectly follow benchmarks.
- Thematic concentration: Focused funds may lack diversification.
When evaluating a fund, investors should consider the strategy, liquidity, and how well it integrates with their custody and reporting environment.
Comparison with AMCs and Structured Products
Funds are regulated and transparent, while AMCs provide custom strategies within ISIN-based wrappers. Structured products, by contrast, focus on defined payoffs and capital protection mechanisms. All three have roles in modern Swiss portfolios.
| Criteria | Investment Fund | AMC | Structured Product |
|---|---|---|---|
| Regulation | UCITS / FINMA | Issuer-specific | Issuer-specific |
| Customisation | Limited | High | Medium |
| Liquidity | Daily | Daily or periodic | Fixed-term or limited |
| Transparency | High | Varies | Low to moderate |
Who Uses Investment Funds?
- HNWI and UHNWI seeking efficient diversification
- IAMs building thematic and core-satellite strategies
- Private banks applying model portfolios
- Advisors focused on long-term accumulation
Example Allocation
A CHF 10 million portfolio could allocate:
- 20% global equity UCITS fund
- 10% Swiss bond fund
- 5% ESG thematic ETF
- 5% emerging markets UCITS fund
This blend ensures liquidity, cost efficiency, and geographic diversification. It integrates easily with direct holdings or structured overlays.
Conclusion
Investment funds remain essential in Swiss wealth management. They provide access, clarity, and risk control. Understanding the operational and regulatory contrasts between UCITS and NTIP funds helps avoid inefficiencies and supports better client outcomes. IAMs and private banks continue to use funds as key components alongside AMCs and structured solutions to build resilient portfolios.
→ Return to the full investment product overview.
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