Swiss financial services regulator, The Swiss Federal Banking Commission (SFBC) has in its report stated that the country needs to change its tax laws to match that of the prime hedge fund centers – in order to gain popularity as a hedge fund destination. The report deals with several issues pertaining to the hedge fund business such as systemic stability, market integrity, investor protection and business location and also examines the regulatory and tax environment in Switzerland.

The SFBC supports efforts to create incentives for hedge fund managers to locate in Switzerland by improving the operating environment. Switzerland has remained an obscure location for hedge funds. However, it has attracted investments by hedge funds, which accounts for over 5% of the assets invested in the country. The report suggest that although hedge fund businesses carry along with them high risk element, they contribute substantially to efficient capital and risk allocation, enhance market liquidity and promote efficient price formation.

According to the regulator, hedge fund managers’ choice for a domicile (for their funds) depends on tax-based considerations. By aligning the unfavorable tax regime in Switzerland with those of the major hedge fund centers abroad could change managers' negative attitudes toward Switzerland, the commission says, though the country's political authorities would have to take a call, taking into account other considerations.

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