The Liechtenstein investment fund centre was subject to intense competitive pressure in 2011. There was a marked increase in competition between the various European fund locations. In view of the volatile stock markets, the euro crisis, as well as the low level of interest rates, there was a degree of restraint in the launching of new funds. Moreover, the market saw very little innovation, and what there was largely involved the structures of family offices, for example, for private equity or real estate.
Intermediaries and actual clients were extremely sensitive to price concerns in 2011 and expected a price/performance ratio compatible with prevailing market conditions. Consequently, service providers reacted with aggressive price reductions in order to secure the meagre new money inflows.
As one of the three largest fund vendors in Liechtenstein, we shall be confronted with new challenges in the future. On 1 August 2011, Liechtenstein enacted a new law for certain undertakings for collective investments in securities, thus implementing the EU's UCITS IV directive. The aim being to open up market opportunities in the EU by enhancing the attractiveness of the Liechtenstein fund centre. Furthermore, the AIFM directive (Alternative Investment Fund Managers) is to be incorporated in national law by July 2013. These new EU directives will lead to an intensification of competitive pressure on the European fund market.
In future, the UCITS IV legislation should make Liechtenstein even more attractive especially for fund promoters having internationally oriented fund structures. For example, the EU passport held by a capital investment company enables UCITS funds that comply with the EU investment directive to be domiciled and launched in another EU member state without a subsidiary or branch office having to be set up or maintained in that state. The so-called «Key Investor Information Document» (KIID), containing the most important information for investors, supersedes the present simplified sales prospectus. This key information document is standardized throughout Europe and enables investors to quickly compare various funds.
The Liechtenstein UCITS law also provides for new cross-border «master/feeder» structures under the UCITS label. A precondition for the setting up of a feeder UCITS is that this fund must invest at least 85 percent of its assets in units of another UCITS or in the fund assets of another master UCITS. In addition, there are new clear conditions for the merging of funds, and the time to market in cross-border distribution is to be considerably shortened thanks to a more efficient licensing procedure. The notification for the initial licensing of a fund is coordinated directly between the supervisory authorities.
The EU's AIFM directive came into force on 21 July 2011 as a direct consequence of the financial crisis. As a result, the EU now subjects the managers of alternative investment funds (AIFM) to official supervision. The EU member states must incorporate the regulations in national law by 21 July 2013. Managers domiciled in the EU will therefore have available an EU passport from 2013 which permits the management and distribution of non-UCITS funds throughout the EU. In addition to hedge funds and private equity funds, this will also apply to real estate and commodity funds as well as to all open and closed collective investment undertakings. The directive also applies to managers of non-UCITS – which are domi ciled in a third country such as Switzerland – who want to distribute a non-UCITS fund from there in the EU.
Development of investment funds volume
2007 – 2011, in CHF millions
Development of custodian bank mandates
2007 – 2011, in numbers