How entrepreneurial families remain successful long term and why LGT is committed to sustainability.
Your Serene Highnesses, over the course of its over 900-year history, your family has not only assumed responsibility as entrepreneurs, but also set the course for political stability and economic prosperity in Liechtenstein. What does this legacy mean to you?
H.S.H. Prince Philipp: Like any legacy, it is also a responsibility and must be fostered. However, it should not be forgotten that the success of Liechtenstein is both the result of the diligence of its inhabitants and its political institutions, as well as a question of good fortune and circumstances.
As a small nation, we are flexible and can make decisions that are closely aligned with the needs of the citizens. This has often proven to be an advantage in the past. We also benefit from our relationship with two good, strong neighbors: Switzerland and Austria.
H.S.H. Prince Max: We are, of course, also very grateful and a little bit proud of the history of the country and the family. And it is tremendously exciting and motivating to be involved in further shaping that history.
What must a family do to not only be successful, but also remain united long term?
H.S.H. Prince Max: The family must define its own objectives. When they have done so, they should then establish appropriate structures and processes, and foster the corresponding values. Our family charter, which dates back to the 17th century, created a formal framework that continues to strongly shape our family to this day. Equally important, however, are informal values and practices that are discussed and embodied by the family, and that we try to pass down to the next generation.
H.S.H. Prince Philipp: The clear rules set out in our family charter, in particular as regards succession to the throne and the transfer of family assets, are of course key. Without such rules, generational changes can often lead to disputes. But we also very consciously foster cohesion, for example by holding family days on a regular basis. These are sometimes attended by up to 50 or 60 people.
Succession is often a major challenge for family-owned companies such as LGT. What is the Princely Family’s philosophy in this regard?
H.S.H. Prince Philipp: This is another area the family charter helps us in, as does the fact that the Prince is both the head of the family and usufructuary of the family wealth. As such, he has the highest decision-making power, also when it comes to matters of succession. The Prince’s portfolio includes several companies, and most of these are currently managed by external executives. However, members of the family always have a seat on the company boards, which enables them to contribute actively.
The family also defines itself through its business activities.
H.S.H. Prinz Max von Liechtenstein
H.S.H. Prince Max: The family also defines itself through its business activities and we consciously encourage our family members’ interest in our businesses. Family members have held a variety of roles in the different family companies over the years – more often at a board level than at an executive management level. A certain amount of flexibility in terms of how the family is involved has always worked well for us. In summary: we like to be involved, but also want to make sure that the people involved have the right skill sets for the responsibilities they carry.
A long-term, sometimes even conservative approach, as well as adhering to an entrepreneurial vision are often regarded as the recipe for success for family businesses. However, digitalization and the rising unpredictability of political and social processes increasingly call for quick reactions and decisions. How does LGT master this balancing act?
H.S.H. Prince Philipp: We have indeed pursued and successfully implemented a clear strategy for almost two decades. It comprises a focus on private banking and asset management, as well as an international growth and diversification strategy. In the implementation of this strategy, we benefit from the advantage of a stable and extremely straightforward ownership structure. Because we only have one shareholder, we can make decisions efficiently and, if necessary, very quickly.
The current uncertainties also complicate the task for investors. What principles does the Princely Family follow in managing its own assets and those of its clients?
H.S.H. Prince Max: Investing successfully has never been easy. Uncertainty and unpredictability have always been a reality for investors. That is why we try to be systematic and disciplined, both as business owners and investors, and to think and act with a long-term perspective. We strive to carefully evaluate risks, diversify them in a targeted manner and to work with excellent internal and external investment managers whom we can trust. When we choose to delegate investment responsibility, we aim to achieve a good structural alignment of interests with the investors and a good understanding and control with regard to their activ- ities. As long-term oriented investors, we like to have a substantial allocation to non-liquid markets that have achieved significantly higher returns for reasons that we believe will remain valid over time. These include private equity and private debt.
LGT is becoming increasingly involved in the area of sustainability, in particular sustainable investments and impact investments. What is this commitment founded on and which goals are you pursuing through it?
H.S.H. Prince Max: Both for the family and for LGT, the ability to act and invest with a long-term perspective has traditionally been an important success factor. We have often succeeded in correctly identifying the megatrends of our time and aligning ourselves accordingly. Megatrends change and have to be identified and addressed continuously.
Today’s megatrends include the record levels of pollution and the many resulting environmental consequences, as well as increasing social and political polarization in many regions of the world. As a company with a long-term orientation, but also as investors and citizens, we must focus on addressing how to counter these trends. Competently implemented investment strategies with investments in well-managed, sustainability-oriented companies will make an important contribution to reducing these problems and generate attractive returns.
H.S.H. Prince Philipp: From numerous discussions with our clients, we know that they too increasingly want to contribute to a more sustainable and therefore better world. What’s more, numerous studies show that sustainable investing is also worthwhile from a risk-return perspective.
The line of descent of the Princely Family of Liechtenstein began with Heinrich I of Liechtenstein (1216–1265), who was given freehold ownership of the baronial estate of Nikolsburg in South Moravia from King Ottokar of Bohemia. In 1699, Prince Johann Adam I acquired the Lordship of Schellenberg, followed by the county of Vaduz in 1712. In 1719, the territories were united and elevated to the status of Imperial Principality of Liechtenstein. Today, the Principality of Liechtenstein is a constitutional monarchy and sovereign state in the heart of Europe. As the head of the Princely Family and also the head of state, the reigning prince exercises sovereign authority together with the people. The Princely Family is active politically and pursues numerous business activities. It is a keen advocate of the arts, sciences and social welfare.