Liechtenstein a ''boutique'' for investors

The Daily Yomiuri, September 3, 2001
By Mikiko Miyazawa (Daily Yomiuri Staff Writer)

A Liechtenstein investment fund company would appear to be an unknown quantity to Japanese investors. Yet, what makes ProfitFundCom AG of Liechtenstein unique is the fact that it combines its practical investment expertise in Europe with theories established in Japan.

''It's a balance of theory and practice,'' Matthias Voigt, the fund's chief executive officer, told The Daily Yomiuri while on a business trip to Tokyo to meet potential investors.

With more than 20 years experience in the banking industry in Germany, Luxembourg, Switzerland and Liechtenstein, Voigt is an expert in financial services.

With the Tokyo-based Profit Research Center Ltd. As its chief advisor, the company manages two funds---the JapanAsia Equity Fund and the Global Macro Fund.

It was back in 1999 that Voigt and Richard Werner, managing director and chief strategist of the center, came up with the idea of establishing an investment fund company in Liechtenstein.

Werner's research center has years of experience in advising global hedge funds, banks, corporate treasurers and private clients.

It also has become well known for its unique research approach, based on the quantity of liquidity theory. According to the theory, world markets are manipulated by central banks, and their main control tool is not, as widely believed, the price of money, or interest rates, but is instead the quantity of credit creation, or liquidity.

By analyzing financial markets using the theory, the center has been able to forecast turning points and market direction with a high degree of accuracy. ''We thought it would be a good idea to establish an investment fund company....Mr. Werner is the main and most important financial advisor,'' Voigt said.

Established in April 2000 in Vaduz, Liechtenstein, ProfitFundCom manages investment funds with the aim of building a solid portfolio of open-ended funds, domiciled in Liechtenstein.

The center's liquidity analysis is applied to the Global Macro Fund's investment decisions. The fund is a true macro fund in the sense that macroeconomic models are used in the decision-making process, Voigt said.

On the other hand, the JapanAsia Equity Fund combines macro research with analysis from the center's microeconomic research section. Voigt said the fund was a ''pure equity fund'' that took a ''micro approach'' in selecting stocks.

The chief executive said he was proud of the Global Macro Fund's unique methodology. ''As far as I know, there is nothing like Global Macro, because we invest in markets, not in specific companies. We just see one market and we see the currency movement, and the combination of it is our investment strategy,'' he said.

Voigt stressed the need for ''balanced risk.'' ''Wherever the market moves, you are covered. If one market goes up, another market goes down...In the respect, the current market environment is very, very interesting,'' he said.

Though the JapanAsia fund is currently weighted toward Japan, the chief executive said they were examining investing in other Asian countries, such as Indonesia, Malaysia, Taiwan, South Korea and Hong Kong.

According to the company's Web site, the JapanAsia Equity Fund has performed in line with the Tokyo Stock Price Index since last December, while the Global Macro Fund has outperformed the Solomon Smith Barney Global Equity Index by about two percentage points over the same period.

Investment funds boom

The investment fund industry is relatively new in Liechtenstein, a country well known as a European financial center. According to Voigt, the growth of the investment fund industry in Liechtenstein followed the country's entry into the European Economic Area (EEA) in 1995, which required it to adjust its regulations to EEA standards.

Within the financial sector, banking and insurance laws were changed, leading to the establishment of an investment fund industry.
In 1998, there were 10 investment fund companies and 20 investment funds registered in Liechtenstein. By the end of 2000, the number had increased to 15 and 40, respectively.

Voigt, who heads the Liechtenstein Investment Fund Association, said there were currently 18 investment fund companies and 80 funds registered in the country.

A small country sandwiched between Switzerland and Austria, Liechtenstein, with a population of about 30,000, has many advantages in terms of business, Voigt said.

''It is a small country, and the (investment) authority is very well organized and efficient. So we have very quick ways to get decisions,'' he said. ''We have legislation which is on the one side connected to Switzerland and on the other side to the European Economic Area. So there's a wide range of possibilities in designing our funds,'' he said.

Voigt added that the cost of establishing funds in Liechtensrein was lower than in other financial centers, such as in Luxembourg, Ireland and Germany.

Though such financial centers have much more liquidity, Voigt said Liechtensrein was not attempting to compete with them. ''Liechtenstein is in a position of creating a new niche business. Liechtenstein is a boutique, and Luxembourg is a warehouse,'' Voigt said.

''Because we are so small, we can design our products individually and is just a question of investors' taste, whether to go shopping at a warehouse or a boutique.'

As for the current economic condition in Japan, Voigt was positive. First of all, he said he regarded the current situation as being favorable for investment.

''The more pessimistic the environment is, the better the chance is,'' he said. ''If you have a mood that everything is going down, you'd better buy the market.''

In spite of the prolonged recession in the country, Voigt is confident that Japan's economy will soon start picking up. ''We are very interested in investing in Asia, especially in Japan,'' he said. ''We believe that after this long and terrible downturn and recession, the market is going to pick up sooner or later, in the next three, six, nine months.''

But at the same time, Voigt believes Japan needs structural reforms to revitalize the economy, including the reorganization of the Bank of Japan. He said the central bank and Japanese politicians were aware of the need for reform.