Financial Center Liechtenstein – Asset Management, Fund Launch, and the Liechtenstein Way. Markus Hill spoke for FUNDBOUTIQUES.COM with David Gamper, LAFV Liechtenstein Investment Fund Association, topics on diversification, digitalization, ESG, family offices, crypto assets, CAT bonds, real estate, and mezzanine financing. Additionally, the information on innovation and rating of the location and the conversation rounded off by an interesting note on Liechtenstein, nutrition, and hiking.
Hill: In which asset classes are a particularly large number of funds currently being launched in Liechtenstein?
Gamper: In contrast to the domiciles of Luxembourg and Ireland, where the large asset managers dominate, the Liechtenstein fund center specializes in private label funds. The entire ecosystem is geared towards this and it is also the main topic at the association. It is quite typical that there are no particular focal points, but that the asset classes are very broadly diversified. It’s just a site for boutique funds. One thing is very noticeable, however, and that is that many sustainable funds are being launched. More and more fund initiators are making a point of classifying their products as so-called light green (Art. 8 Disclosure Regulation) or dark green products (Art. 9 Disclosure Regulation). It is becoming increasingly apparent that sustainability is no longer a niche, but mainstream. This is good for the domestic fund industry because in my view Liechtenstein is already relatively advanced in terms of sustainability. I am thinking, for example, of the asset manager test conducted by the FUCHS | RICHTER testing body last year, or the country’s leading position in solar energy and organic farming, as well as the many sustainable projects.
Hill: How do you explain this broad diversification of asset classes?
Gamper: The starting point for the broad diversification in asset classes is the wide-ranging expertise. There are many family offices and foundations in Liechtenstein that have been involved in the management and structuring of various asset classes on all continents for decades. Of course, this knowledge is also available in the other financial sectors and at the Financial Market Authority (FMA). In addition, one also deals with new asset classes if this is requested by the customer. This applies to both market participants and the regulator. Individual solutions in particular are a strength of the financial center. Cryptoassets are just one example. After all, the first fund of this type was founded in Liechtenstein over three years ago and there is already a well-developed ecosystem for this fund category. There are also token-based fund units.
Even with other asset classes, which tend to be peripheral topics but often have a low correlation to traditional investment products, many fund initiators are amazed at the expertise with which certain topics are approached because the experience is already there.
A striking feature of Liechtenstein, in general, is its liberal basic attitude. In contrast to the restrictive attitude of other countries, the FMA is also open to new ideas but combined with the necessary diligence. A fund initiator once put it this way: “From our point of view, Liechtenstein as a fund location is very open to innovation, but at the same time very solidly positioned. This is the combination we were looking for.”
The combination of innovation, experience and a liberal attitude means that fund projects that are not prevalent are also implemented. These include crypto assets and trend-following strategies on crypto assets, CAT bonds, physical precious metals, and mezzanine financing. The latter represents a hybrid form between equity and debt and serves as an equity substitute for real estate developers. If the developer uses mezzanine capital in addition to his equity, he can reduce his equity investment and use the funds released to finance further projects.
Hill: What other issues are currently occupying the association?
Gamper: The shortest possible time to market is an increasing requirement of fund initiators and at the same time one of the greatest strengths of Liechtenstein as a fund domicile. Recently, a fund initiator told me that the entire process from the initial contact with the fund company to the approved fund took one month. That is extremely fast, the fund company worked at top speed, which is certainly not always possible. Nevertheless, the time to market in Liechtenstein for a regulated fund is even shorter than for unregulated funds in other jurisdictions. However, we are also constantly working on optimizing the processes.
As an association, we provide information about the Liechtenstein financial and fund center. For the fall, we are planning talks in Düsseldorf and Munich with the Bankers Association and the Association of Independent Asset Managers Roundtable. In addition to the opportunities in the financial center, we always inform about the fact that Liechtenstein adopts European law and thus also fund law, which has the same classification as Germany concerning tax conformity and transparency since 2015 and the FMA Liechtenstein is a full member of the European supervisory authorities. Facts that are often not yet known. Next year, if the situation allows, a larger event is then planned in Frankfurt.
The subject of taxes is always the topic. For example, we recently had a tax information sheet prepared for German, Austrian and Swiss investors in Liechtenstein funds.
We also invest in continuing education in the fund sector. The current focus is on sustainability and compliance. In addition to combating money laundering and terrorist financing, compliance with international sanctions was the topic of the last workshops. The last point, in particular, is much more profound in the fund sector than it seems at first glance.
We are currently in the start-up phase of a digitization project to optimize data delivery and data preparation for our funds. One of the reasons is the increasing demand from data providers, as interest in Liechtenstein funds is growing. In Liechtenstein, we have the unique situation that the interest association is by legal mandate, the official publication organ. Thus, all relevant information about the funds domiciled here can be found on the LAFV website.
Hill: Beyond the fund industry – are there other fields where many interesting things are developing in Liechtenstein?
Gamper: One of the most active areas is probably blockchain technology. Liechtenstein was (yes) the first country to create comprehensive legal regulations and thus legal certainty. This attracts companies and service providers that deal with the topic. The government’s Staff Office for Financial Center Innovation (SFI) regularly organizes the Blockchain & Innovation Circle (BIC). The currently virtual lectures not only present the latest developments but also topics such as tax treatment, due diligence, and legislation. The University of Liechtenstein organizes the Blockchain in Finance event series and offers a certificate course in Blockchain and FinTech.
Very recently, the international rating agency S&P Global confirmed Liechtenstein’s country rating in its May 31, 2021 research update with the top rating of triple-A with a stable outlook. Liechtenstein thus belongs to an illustrious group of only 11 AAA countries. One of the main reasons for this is the good situation of the public budgets, which have no debt. Even in the crisis year 2020, the country’s accounts closed on a positive note.
And if you still do not know what to do in the summer, you could get to know the Principality. I recommend the Liechtenstein Trail, which opened in 2019 to mark the 300th anniversary. Hiking enthusiasts can walk through and get to know an entire country within a few days. The 75-kilometer trail leads through all 11 municipalities of the country, passing vineyards, nature reserves, old village centers, many sights, and even my house.
Since this year, the themes of “regionality” and “sustainability” can also be experienced along the way. Various farm stores and adventure fields along the way invite you to discover regional diversity. In Vaduz, for example, visitors can learn at the nutrition field how much land is needed to feed a person, at the herb garden in Mauren they can discover 100 different medicinal and aromatic herbs, and at Eschnerberg one can enjoy fine local wine.
Hill: Thank you very much for the interview.
“The Liechtenstein Investment Fund Association (LAFV) was founded in September 2000 and is the official representative body of the Liechtenstein fund industry. Its members are UCITS management companies, most alternative investment fund managers (AIFMs), and other service providers in the fund industry, such as custodian banks, law firms, auditors, specialized IT service providers, or training and education institutions. LAFV is represented by a board of directors consisting of the following persons: Alexander Boss (President), Bruno Schranz (Vice President), Ralf Konrad, Raimond Schuster, and Alois Wille. The LAFV makes it it’s business to promote the development of the Liechtenstein fund center and thereby further improve its attractiveness for fund providers and investors. It is achieved in particular through active further development and needs-oriented expansion in fund legislation. Furthermore, the support of the members, as well as the representation of the interests of the fund industry and the location at home and abroad, belong to the tasks of the association.”
Liechtenstein Investment Fund Association / Liechtensteinischer Anlagefondsverband (LAFV): www.lafv.li
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