As Europe looks to Asia for new business, the tiny but wealthy state of Liechtenstein is loaning its treasure trove of art to China to demonstrate the principality’s speciality: long-term wealth preservation. But is it working? Alex Matchett reports
In a royal palace in central Vienna, Austria, a white-haired doctor is placing himself carefully on an electronic scale, bending forward, removing his tortoiseshell spectacles and placing his eye against a retina reader. There is a click and an enormous metal door swings slowly open. 'Now, please hurry as we have only twenty seconds before it closes again,' he says.
The doctor ushers an excited group of Chinese journalists swiftly through the thick metal jaws and into an unassuming underground storage facility, the kind in which canned food or car parts are often kept. Unassuming except that from the mesh shelves peer the faces of Renaissance Dutch merchants, Napoleonic generals and English duchesses, rendered exquisitely in oil on canvas: this room houses some of the finest examples of the Royal House of Liechtenstein's princely art collection, some of the best art on earth.
But the room, and the people in it, symbolise more than centuries of patient appreciation, patronage and purchase. The doctor is Johann Kr’ftner, the director of the Princely Collections, who is now being bombarded with questions from the Chinese journalists getting an insight into Liechtenstein afforded to few.
It is part of a press trip organised in conjunction with the loan of the Princely Collections' most notable masterpieces, chiefly one hundred Dutch oils, to state museums in Beijing and Shanghai. By providing a window on to the most respected masters of the European artistic tradition, the tiny principality is hoping to hold the gaze of Chinese investors as well as art aficionados.
Couched in the Alps between Switzerland and Austria, the tiny country — only 160 square kilometres and 37,000 people — is ruled by a parliament of 25 members with the Prince of Liechtenstein as head of state. One of the oldest royal families in Europe, they have come to symbolise not only the country but also the management of wealth for which Liechtenstein is famous, putting billions of dollars of their fortune into their private bank, LGT, and remaining by far the largest investor.
’It's a very visible symbol for the alignment of interest between the family, the bank and its clients,' says LGT's head of group marketing and communications Christof Buri. 'Nowadays in most banks you have anonymous shareholders, managers who come and go. There is a saying in Chinese, “Wealth doesn't surpass three generations.” It's important for families in Asia to see that the Liechtenstein family has been around for eight centuries — it's important to create, preserve and manage wealth for such a long time. The Princely Collections are testimony of that.'
The principality claims that it is in the process of reforming its image from tax haven to safe haven and as part of this is looking to China to boost its banks. Before 2008 Liechtenstein refrained from giving out any information on those who used its financial services, but since then it has sought to open up in order to maintain global trust as renegade tax regimes come under increasing scrutiny.
’As of January this year, we have committed to 37 international tax agreements; the last one we signed was with China,' says Adolf Real, chairman of the Liechtenstein Bankers' Association. 'We're complying with international standards — that's very important to us, to get rid of the legacy of untaxed client money. We do not chase away clients who don't have tax compliance but assist them to achieve that.'
It appears Liechtenstein has made its own market: it has capitalised on the amount of 'untaxed client money' in the country by charging fees to get everything above board. Mechanisms such as the Liechtenstein Disclosure Facility, an agreement with the UK which allows those liable for tax in other countries to declare their accounts before 2016, have allowed their clients to avoid jail and helped the principality's finance sector to work with other states, eroding the unsavoury tax-haven image.
Christof Buri of LGT also points to the money flowing out of the private banks in Switzerland: 'The Geneva banks have changed their legal structure, so for us it's a very credible value proposition.'
Now its hands are cleaner, LGT is also looking to be more competitive as its former tax 'advantages' diminish. 'We have an array of services: it's not only investing in securities, it's not only money transfer, it's also venture philanthropy — it's all different kinds of service for the HNW individual,' says Real.
The arrival of a large chunk of the Princely Collections' best assets in Chinese museums is a subtle vehicle for promoting the legitimacy of Liechtenstein's rebrand. Art, and the patronage it inspires in HNWs, show a more progressive outlook, conveying that LGT no longer focuses on secrecy as its overriding attraction.
From the 17th century onwards the princely family has grown an extensive art collection to rival any of the other royal collections in Europe. The fortunes of this cultural trove have been mixed, however. With his Jewish wife, Prince Franz I fled his Vienna palace for Liechtenstein following Hitler's 'Anschluss' unification of Austria with Germany, leaving behind much of the collection.
’During the war we had to fool the Nazis to get them through Austria,' says Prince Regent Alois, who is effective ruler of Liechtenstein (his father, the elderly Prince Hans-Adam II, having retired). 'We had a very courageous professor who got a permit for a few family pictures to be transported, so Rubens' daughter became a family member, and so we tricked the Nazis — but some art was lost.'
The Princely Collections are now a collage of imperial Baroque pomp harboured in the family's estates and palaces that pepper Austria all the way to the Swiss border and into Liechtenstein proper. The City and Garden Palaces in Vienna (not in Liechtenstein itself) are the jewels in the crown, although they don't attract the same tourist hordes as the Albertina, the Imperial Treasury or the countless other history and art museums in the Austrian capital.
Both palaces are pieces of art in their own right. Among the masterpieces in the Garden Palace is Rubens' Decius Mus cycle: in six huge canvases it depicts the rise and fall of the Roman hero Decius Mus, sacrificing himself in battle for the glory of the Eternal City. They are rich and imposing scenes that seem entirely at home within the Princely Collections, but they also have parallels with the need for selflessness in Confucian society. The appreciation of not only the form but also the subject transcends cultures and has done for centuries, Dr Kr’ftner informs us: the princes used to devote whole rooms to East Asian art.
It's an appreciation that carries on today across town in the City Palace, which is half bank, half stately home. Dr Kr’ftner explains how a set of baroque Cuban mahogany chests, complete with their original Eastern porcelain paintings, took two restorers a year to puzzle together from their renegade pieces, and that was following a painstaking period spent trying to locate the pieces.
Over a lunch well complemented by rich Bavarian reds from the princely vineyards, Prince Philipp von und zu Liechtenstein, brother of Prince Hans-Adam and chairman of LGT, emphasises the importance of heritage and responsibility. (He also makes his position as an economist clear when propositioned over a more astrological approach by one member of the group — Philipp does not believe it is possible to predict the future, however insistent the advocate for cosmic forces.)
He has worked in London and Paris for Hambros and Rothschild, has been a member of the board of directors of LGT since 1981 and is a governor of the European Financial Forum. These credentials underpin an approach to wealth management that seeks to achieve the same prominence as the Prince's art collection.
That evening in Liechtenstein's capital Vaduz, Josef Beck of the Liechtenstein Chamber of Commerce tells me exactly how they are looking to achieve that prominence. He highlights the role Prince Philipp has previously played in networking with CEOs and government ministers around the world, particularly in the USA.
Strikingly, his conversation is not peppered with corporate jargon or banking acronyms but with intriguing colloquial anecdotes that are part of the territory for such a tiny state. Beck speaks fondly about bumping into the royal family in Vaduz and how a quarter of the population squeeze into the football stadium for their home matches.
These stories are echoed the next morning further down the valley, at the factory of power tools giant Hilti. Our guide tells me that, after a fall in the woods while running, she was helped by a passing jogger who happened to be Prince Regent Alois. She shouts the story over the whirling buzz of Hilti's factory floor — a reminder that while Liechtenstein is best known for its banking industry, only 27 per cent of its GDP comes from such services while 37 per cent comes from heavy industry. 'Every fifth artificial tooth in the world comes from Liechtenstein,' says Beck.
LGT has been successful in moving into China, with one client investing $1 billion with them, but these are still early days, says Christof Buri: 'If we're in China today it's for asset management and investing in China for our clients or working with Chinese banks and pension funds to help them invest their money. It will take some time to establish private banking there, but we do consider Shanghai a hub for that. We have been approached by ICBC and Bank of China to partner up, but we're just too small for that.'
When it comes to seeing if Chinese investors will send their money into the principality, rather than keep it with the Asian branch of LGT, Wang Chunmei of China's Economy & Nation Weekly magazine tells Spear's that Liechtenstein's low tax may be a temptation for Chinese investors in Macau, Hong Kong and Taiwan.
Wang says her readers 'will be very curious about the royal family, especially their ideology, style, wealth inheritance, and will be very interested to know about the development of private banks and other financial sectors in the country'. Marshall Yuan of CBN Weekly agrees: 'Asian people are very keen on royalty.'
LGT is not alone in using patronage to get its brand out to the Chinese affluent. Michael Butterworth, a business reporter working for a television station in Beijing, pointed to UBS's role as main sponsor of the Formula One Chinese Grand Prix, saying that while 'big European banks are thought of pretty highly over here as a mechanism for investment, the bigger issue is probably clearing all the regulatory hurdles necessary to set up a bank in China'.
Perhaps the image of romantic Alpine princedom is more marketable: one journalist spoke of identifying Vaduz with Paris or Milan, rather than Z’rich or Geneva. Chinese visitor investment is considerable: in 2012, 165,000 Chinese tourists came, many keen to buy watches and coveted Liechtenstein stamps.
After our tour of his palaces in Vienna and the banks and factories of his princedom, Prince Regent Alois greets us in his Vaduz castle. 'They're good ambassadors for Liechtenstein,' he says of his extensive collection of paintings. 'We like to show them to other people, we let them travel to exhibitions as one of the most important collections of Old Masters in the world.'
Even beneath the prince's feet lies one of the best collections in the world of antique weapons, as well as another vault full of 17th- and 18th-century oils. 'You need a certain amount of luck; we're lucky we didn't lose them in wars or in fires.' Although, thanks to a more prudish prince, some important works were sold off cheaply: 'He was not so keen on naked women or violent scenes.'
’They are very valuable and we see them as an investment,' says the Prince Regent, and it's certainly difficult to underestimate the importance of the collection. For such a small state, with limited diplomatic clout, soft power is priceless. In terms of attracting investment it may not offer return in itself, but it certainly makes a good shop front, especially to show heritage and wealth preservation.
But perhaps no one knows better than the princely family that art should never be held hostage to money. Hopefully the prince sees the investment as one of time and conservation rather than cash: surely the real meaning of wealth to any family that's kept it over eight centuries.
Back in the bomb-proof vault beneath the City Palace in Vienna, a Chinese journalist points at a Flemish portrait and jokingly asks: 'How much is this?' The good shepherd Dr Kr’ftner is emphatic: 'What? It's priceless! How can you ask such things?'
Picture: The Numbering in Bethlehem (1566) by Pieter Brueghel the Elder