Second Liechtenstein Impact Investing Forum: new tools for institutional investors

In her second post on the Liechtenstein Impact Investing Forum,  responsible investing expert Dr. Ingeborg Schumacher, states that lower interest income is resulting in institutional investors, such as foundations or pension funds, facing particular portfolio management challenges. They are forced meet their obligations, such as pension payments or distributions, in the form of support contributions. Andreas Reichlin of PPC Metrics explained that the classic conflict of objectives between maintaining purchasing power, avoiding investment risk, and stable distributions is becoming ever more complex. According to experts at the event, the solution is to establish an investment strategy based on risk capacity, risk tolerance and value fluctuation reserves, and a disbursement model that flexibly corrects disbursements that are too high.

It was also made clear that foundation boards should be aware of their liability risks.  They are even liable to the extent of their private assets, but only in the case of a breach of duty resulting in damages for which they are responsible. To avoid this, the experts at Zurich Versicherung recommend regular documentation. Consaltis believes that in view of increasing transparency requirements, investment controlling as proof of due diligence can also help. Problem areas can be identified in a timely manner through an audit to satisfy either legal or financial parameters. However, it is reassuring that, to date, the only known lawsuits against pension funds have been based on embezzlement.

In the view of the experts, alternative investments such as private equity represent another alternative in the current investment environment. By providing capital for entrepreneurial commitment, regional structures and companies can also be supported.  The experts at PWC also see great potential for financial service providers from Liechtenstein in the area of impact investments. The first products, such as microfinance funds or a water funds, have already been issued. Providers can also benefit from attractive location benefits, such as EEA access. Given the growing expansion of infrastructure, primarily in emerging markets, there is a high demand for investment.

Private equity investments definitely offer opportunities for investors to earn a high risk premium. However, there are large differences between the various managers and these are significantly greater than with stocks, for example. Implementation is also more complex, in view of over-commitment strategies and the necessary diversification across sectors, financing strategies and vintage years. Such implementation problems can be solved, but they are also time and resource efficient. Consequently, the cost should also be compared to the higher yields prior to investing, and experienced managers are preferable.

To the Impact Forum talks

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Photo © Medienhaus Vaduz AG. From left to right:

  • Julia Balandina Jaquier, JBJ Consult
  • André Zimmermann, SHS Gesellschaft f. Beteiligungsmanagement mbH
  • Volker Pfahlert, Numares GmbH
  • Ingeborg Schumacher, Forum NG
  • Oliver Waldherr, Consaltis AG
  • Berenike Wiener, Bundesverband Deutsche Stiftungen
  • Andreas Reichlin, PPC Metrics
  • Michael Kuhn, Consaltis AG



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