Family offices and independent asset managers in the DACH region have been showing an increased interest in launching private-label funds for years. Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with David Gamper, Managing Director of LAFV (Liechtenstein Investment Fund Association), about current developments in these client segments and about current developments in the cryptocurrency sector. Additionally, topics such as sustainability, ESG, and taxonomy were discussed. Regulation, current interests in association activities, and “Animal Farm” were also addressed.
Hill: What role does the area of fund distribution in family offices play for Liechtenstein as a location?
Gamper: Liechtenstein is a fund domicile whose market participants are primarily specialized in the launch and administration of private label funds. Asset managers from Switzerland and Liechtenstein have always been among the most important fund initiators in our location. In the last three to four years, we have noticed an increase in demand from two segments, asset managers from Germany and family offices, who are discovering Liechtenstein as a fund location for themselves. LAFV, too, has recently received interesting inquiries from family offices regarding the establishment of funds and the relocation of the registered offices of existing funds to Liechtenstein. This positive development for the fund center is due on the one hand to the excellent legal and tax framework. There are, for example, separate fund categories for asset structuring which do not have to go through an approval process at the Financial Market Authority but only have to be registered. Nevertheless, and we see this as a great advantage, these funds are directly supervised. On the other hand, the increasing demand in the area of family offices is related to the fact that many investment companies are focusing on the area of asset structuring. So to answer your question: family office funds are one of our growth segments and are playing an increasingly important role.
Hill: What is the current development of your site in the crypto-currency sector?
Gamper: The first crypto asset fund under European law was approved in Liechtenstein in March 2018, followed by several others shortly after. That was in the middle of the phase when the price of Bitcoin collapsed. This situation was of course not very advantageous for the development of the funds, neither for performance nor for the fund volume. Currently, however, these funds have recovered very well and can now offer a much more positive return. Nevertheless, the total volume of these funds is still at a manageable level. Besides, there is another interesting development from the blockchain. On January 1, 2020, the Token and VT Service Provider Act (TVTG), often referred to as the Blockchain Act, came into force in Liechtenstein. With this law, Liechtenstein is the pioneer in Europe and offers legal security for companies operating in the blockchain. The new law also brought something new for the fund industry, because the TVTG provides the legally secure basis for tokenizing fund shares and then trading these tokens. This new possibility has already been used.
Hill: Sustainability, ESG, and taxonomy are currently the subject of intense debate throughout Europe in the field of asset management. How do you deal with this topic in Liechtenstein?
Gamper: Asset management in Liechtenstein is primarily a topic for banks, but also asset managers. The banks in particular are very well positioned in an international comparison concerning sustainability. For example, the Private Banking Magazine wrote on November 16 this year: “When it comes to sustainable investment, investors are best advised to bring their assets to Liechtenstein. As this year’s asset manager test conducted by the FUCHS | RICHTER testing authority shows, the small financial center stands out in terms of sustainability”. It is precisely the two best-rated banks from Liechtenstein, which occupy first and fourth places in the ranking for the entire German-speaking region, that also manage the majority of fund portfolios. Besides, a study of Liechtenstein equity funds as early as 2016 concluded that they invest exceptionally well in terms of ESG criteria. The fund industry itself, which is responsible for the administration of the funds, is primarily concerned with the implementation of the comprehensive regulation. This implementation takes place under enormous time pressure and therefore ties up considerable resources.
Hill: Which current topics are you currently dealing with more intensively?
Gamper: You got to the heart of the previous question about sustainability, which is a topic that is currently occupying us in all its facets. First and foremost, however, regulation takes up a great deal of time. In this respect, we at LAFV have set up our working group and the members are very interested in participating. A current project at the national level, in which all financial associations in the country are involved, is the further improvement of the prevention of terrorist financing and money laundering. The Global Forum on Transparency and Exchange of Information for Tax Purposes (OECD) has already given Liechtenstein good marks in the country evaluations in 2015 and assessed Liechtenstein as a “Largely Compliant”. Since then, Liechtenstein has been rated the same as, for example, Germany and Great Britain, and of course, we would like to maintain this good rating. A perennial fixture at our company has long been the Taxation Working Group, which, in addition to BEPS and DAC6, deals with issues that serve to prevent unnecessary taxation, such as double taxation through withholding taxes, for our fund investors. Current topics also include digitization and data security, the further optimization of framework conditions, and cross-border fund distribution.
Hill: Besides your work in the association, what do you do in your hours of leisure?
Gamper: I have just read two books. One was a classic, George Orwell’s “Animal Farm”. My other reading is a reference book on how blockchain technology works. What I’m going to read next I’ll know after the holidays. Let’s see what’s under the Christmas tree. Until then, I probably won’t have much time for reading – except for my job.
Hill: Thank you very much for the interview.
Link to the Liechtenstein Investment Fund Association: https://www.lafv.li/DE/Home/Dash
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