Raising the Liechtenstein flag
The Drawdown (TDD): What are the comparative advantages of Liechtenstein as a domicile compared to Luxembourg?
Bjoern Kogler (BK): Nine out of 10 times we are pitching against Luxembourg rather than any other competitor in this space. We are trying to increase market knowledge of the comparative advantages Liechtenstein has.
The main advantages include no taxation of net fund assets in Liechtenstein and we have a very short time to market. The latter is very annoying to market participants in Luxembourg. It is written into law in Liechtenstein that the regulator must approve a new AIF fund within just 20 days.
Julien Ward (JW): Switzerland-based investors entering a Liechtenstein-domiciled fund are exempt from stamp tax, so PE firms with a link to Switzerland or targeting a Swiss investor have a clear advantage going to Liechtenstein over Luxembourg. There is only CHF84bn structured in Liechtenstein. LGT has more than 60% market share and advantages with its one-stop operating model. Liechtenstein has no European Stability Mechanism liability, which could be a very important feature if another EU country gets into economic trouble like Greece did.
BK: According to EFAMA, Liechtenstein has had the fastest relative growth in new share class launches during the last five years. Of course, you can say that we started from a low base but it shows the momentum achieved.
TDD: What aspects of the principality make it unique?
BK: Liechtenstein has a triple-A country rating and EEA membership. You can target the Swiss market and you can target the European market. This is unique to Liechtenstein-domiciled funds.
JW: Liechtenstein has no state debt and has had a currency and customs union with Switzerland since 1924, and the Swiss franc is the base currency. Liechtenstein has a wide range of double tax treaties in place – more than almost any other country – and was one of the earliest adopters of automatic exchange of information. It is a transparent jurisdiction. Moneyval came to Liechtenstein in 2021 and gave it a largely compliant verdict, which is a huge tick in the box for the jurisdiction.
TDD: How does LGT try to make Liechtenstein more attractive to PE fund managers?
BK: As an institution, we have knowledge of that asset class. LGT Capital Partners is a CHF100bn-plus proprietary manager. It is completely separate but our people on the asset servicing platform know what they are doing because they do it for our own asset manager.
We have very good calculability of the cost structure. We work with an all-in fee of just two to three pages in length, not the 17 to 21 pages I have seen from some of our competitors.
Also, the transfer agent is included in the depositary bank. Our operating model is a one-stop shop. We offer the AIFM, the admin, the depositary and the ManCo all out of one hand. Unlike many competitors, we have a banking licence for the depositary. So the level of safety with us is very high.
JW: LGT first entered the UK market in 2016 and we have had full branding since about 18 months ago. Having a business presence there is helping to raise the Liechtenstein flag. If you are in Switzerland, Germany or Austria, everyone is familiar with Liechtenstein but there is a distance and unfamiliarity still in the UK, though that is changing now.
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