Securitisation Essentials: Unlocking Illiquid Assets

Introduction

The financial world has evolved dramatically with mechanisms to convert illiquid assets into tradable securities. Through securitisation, fund managers, individual investors with substantial holdings and various institutions can release untapped value from private investments, opening them up to wider investment communities. Switzerland, as a global financial hub, has developed a well-regulated market for structured products, including private asset tracker certificates. These instruments provide a cost-efficient and flexible way to gain exposure to private or alternative investments without the complexities of traditional fund structures.

Understanding Private Asset Tracker Certificates

Private asset tracker certificates are securitised instruments that mirror the performance of non-traditional or privately held assets. These may include private equity holdings, venture capital portfolios, real estate investments, or even alternative assets such as fine art, or debt instruments. Rather than requiring direct ownership, investors can participate in these assets through a certificate issued by a regulated entity or a structured vehicle.

Key Features:

• Performance Tracking: Certificates are designed to replicate the value and returns of an underlying asset or portfolio.
• Liquidity Enhancement: Securitisation enables fractionalised ownership, making traditionally illiquid investments tradeable.
• ISIN Allocation: Most tracker certificates receive an International Securities Identification Number (ISIN), facilitating custody in standard investment accounts.
• No Fund-Like Regulation: Unlike collective investment schemes, tracker certificates are structured as debt instruments, avoiding costly fund registration and reporting obligations.
• Customisation: Issuers can tailor structures with specific payout features, leverage, or capital protection mechanisms.

Benefits of Private Asset Trackers in Switzerland

1. Regulatory Clarity and Market Effectiveness

Switzerland’s financial regulatory framework is one of the most sophisticated in the world, offering clear guidelines for structured products. Private asset trackers fall under the structured products category, which excludes them from fund regulations under the Swiss Collective Investment Schemes Act (CISA). This regulatory distinction simplifies compliance requirements, allowing asset managers to issue structured products more efficiently and cost-effectively.

2. Broadened Investor Access to Private Markets

Private investments often come with high barriers to entry due to large minimum commitments and illiquidity constraints. Private asset trackers solve this by offering investors exposure to private investments without requiring direct ownership or extensive due diligence. Institutional and qualified retail investors can access diverse asset classes through certificates that are tradeable in standard brokerage accounts.

3. Flexible Structuring Options

One of the most attractive aspects of Swiss securitisation frameworks is the ability to customise the structure of tracker certificates. Issuers can design trackers with various features, including:

• Actively Managed Structures: Portfolio managers can dynamically adjust the underlying assets.
• Capital Protection Elements: Certain structures provide downside protection while maintaining exposure to private asset appreciation.
• Leverage Integration: Investors can choose leveraged tracker certificates to enhance returns.

4. Cost-Effective Alternative to Traditional Funds

Compared to launching and operating a private fund, private asset trackers offer a streamlined and cost-effective alternative. The process of establishing a structured product in Switzerland can be completed within weeks, as opposed to months for fund registrations. Additionally, tracker certificates do not require full fund governance structures, reducing operational overheads.

5. Enhanced Liquidity for Private Investments

One of the most persistent challenges with private assets is their lack of liquidity. Tracker certificates solve this by enabling investors to trade exposure to private holdings without requiring direct buy-and-sell transactions of the underlying asset. While the underlying private assets remain illiquid, investors can exit positions by selling certificates back to issuers at net asset value (NAV).

Swiss Market Infrastructure for Private Asset Trackers

Issuance Platforms and Service Providers

Swiss banks, asset managers and specialised securitisation platforms play a central role in launching and maintaining private asset tracker certificates. The process generally involves:

1. Structuring the Certificate: A Swiss bank or an approved SPV structures the note based on investor demand.
2. Custody and Asset Management: A custodian or prime broker holds the underlying private assets or derivatives.
3. Listing and Distribution: Certificates can be listed on Swiss exchanges (e.g., SIX Swiss Exchange) or offered privately to institutional investors.
4. Trading and Valuation: Market makers provide price quotations, while the issuer ensures accurate NAV calculations and reporting.

Regulatory Compliance

Although private asset trackers are not considered collective investment schemes, they must adhere to Swiss Financial Services Act (FinSA) requirements, including:

• Prospectus and Disclosure: Retail offerings require an approved prospectus, while private placements may be exempt.
• Issuer Requirements: The entity issuing the certificate must be a regulated Swiss financial institution or an SPV backed by such an entity.
• Transparency Measures: Fees, underlying asset details, and performance calculations must be clearly disclosed.

Conclusion

Private asset tracker certificates offer a powerful tool for unlocking illiquid assets in Switzerland’s structured products market. They deliver significant advantages by merging accessibility with operational flexibility and economic efficiency, creating fresh investment channels for institutional clients and qualified individual investors alike. The sophisticated regulatory framework in Switzerland adds substantial credibility to these instruments, positioning them as a compelling option when converting alternative investments into marketable securities.

As demand for private market exposure continues to grow, private asset trackers stand out as a scalable and efficient solution for asset managers and investors seeking innovative ways to participate in alternative assets while maintaining liquidity and operational simplicity.

If you are interested in exploring private asset tracker certificates as a solution for unlocking illiquid assets, contact FundFront to learn how we can support your needs. Contact us on our email hello@fundfront.com or fill in the contact form on our website. 

Other articles that may be of interest:

• Navigating Investment Structures: A Comparative Analysis of Offshore Funds, Managed Accounts, and Securitised Vehicles
• Securitisation and the Use of Orphan SPVs
• Securitisation in Alternative Investments

Disclaimer

FundFront provides operational and technological solutions for family offices, fund structuring, securitisation and management. We do not provide legal, tax or financial advice. We recommend that you consult with professional legal or financial advisors to ensure compliance and appropriateness for your specific situation.