SIFEM - Swiss Investment Fund for Emerging Markets

Investment principles

  • Leverage: SIFEM, through its investments, seeks to optimise the flow of additional capital from private and other institutional investors for the benefit of its companies.
  • Subsidiarity: SIFEM provides financing that is either unavailable on the market or not available at reasonable terms and conditions, or in sufficient amounts or maturity.
  • Complementarity/Additionality: SIFEM makes investments that not only fill a gap in financing but also add tangible value, notably in the form of know-how transfers and the provision of technical support to funds and portfolio companies.
  • Sustainability: SIFEM adheres to the basic principles of financial, economic, social and environmental sustainability in its investment activities.

Investments through On- and Offshore Financial Centres

The funds in which DFIs invest are typically structured through so-called Offshore Financial Centres (OFCs). As explained by SIFEM in its Viewpoint Paper on the subject, the reasons are three-fold.

  • First, the use of OFCs allows several investors to pool their resources in funds and then put the combined capital to work in countries with a difficult legal and regulatory environment, where investor protection is limited.
  • Second, the use of OFCs facilitates the achievement of the DFIs’ development mission, as it increases the investment amount at their disposal. But since most DFIs including SIFEM are tax-exempt, their primary motivation for using OFCs is not to avoid taxes.
  • Third, investments structured through OFCs typically offer a wide range of financial structures (including mezzanine, equity, debt and combinations thereof) suitable for investments in the private sector of developing and transition countries, and enable the set-up of multi-country investment funds.

SIFEM constantly reviews the use of OFCs in light of the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes and seeks to follow evolving internationally agreed standards.As SIFEM’s target countries mature in terms of the respect for the rule of law, legal enforcement, investment fund regulatory frameworks, regulatory know-how as well as currency stability and convertibility, SIFEM is determined to invest a larger proportion of its portfolio through on-shore structures.

Investment cycle

SIFEM is a unique, cost-effective and self-sufficient instrument of Switzerland development aid. In contrast to traditional development cooperation instruments, the investments made by SIFEM are intended to generate an adequate return. The investment returns can then be used to finance new projects. This economical business model makes possible the multiple use of federal funds for development purposes.