In the past, Switzerland was once a prime location for the development of investment funds business up until the 1980's. At this time there was a boom in fund management that has resulted in the massive businesses that we see today and Switzerland was overtaken by other competing countries offering more favourable regulations. For example, Luxembourg had both lower taxes and access to the EU market and this, combined with the significantly more flexible regulatory structure, resulted in Switzerland losing out.

In response, the Swiss brought in new flexible legislation and reduced tax rates to ensure a better attitude towards investor protection. In 1995 the Investment Funds Law allowed a much greater transparency that was previously restricted by investment guidelines in the previous law. This new law permitted the local licensing of funds provided they are established in acceptable regulatory regimes, by in the principle of reciprocity. Most notably, this applied to the European Union and an agreement with the EU allowed Swiss funds to market themselves freely under the UCITS guidelines. This became part of the Bilateral Agreements between the EU and Switzerland; however Switzerland was unfortunate in that the EU/Swiss Savings Tax Directive agreement includes UCITS funds from application of the Directive whereas in the EU internal version, such funds from UCITS are considered outside the Directive.

Investments governed by the Investment Funds Law are subject to differing prudential requirements depending on the type of fund recognised. The main types include: