When bankruptcies occur, debtors are obligated to do everything within their power to repay their debts. All of a debtor’s assets are liquidated and distributed among creditors.
But there are certain assets which are affected by bankruptcy procedures. Segregated in-house funds – known as “Sondervermögen” in German and “fonds spéciaux” in French – cannot be used to satisfy claims by creditors in the event of a bank or fund failure.
Collective investments like investment funds and ETFs often qualify as segregated assets. The Swiss Federal Act on Collective Investment Schemes states that “In the event of bankruptcy of the bank or securities dealer, assets and rights that form part of in-house funds shall be segregated in favor of the investors.”
Retirement funds are considered to be segregated funds. However, this designation is not extended to 3a savings accounts and vested benefits accounts. While special privileges apply to those retirement accounts, they are not classified as segregated assets.
Shares, bonds and structured products do not fall under this classification.