Financial Market, Entrepreneurial Economy and Studying Finance
Prof. Dr. Marco J. Menichetti Chair in Business Administration, Banking and Financial Management Institute for Finance [email protected] October 2017 Outline
What is a Financial Market?
Liechtenstein: Entrepreneurial Economy and Financial Market
Studying Finance in Connection with an Asset Management Hub
Menichetti, October 2017 2 Outline
What is a Financial Market?
Liechtenstein: Entrepreneurial Economy and Financial Market
Studying Finance connected to an important Asset Management Hub
Menichetti, October 2017 3 What is a Financial Market?
Financial Financial Intermediaries/ Centers Institutions
Financial Markets
Regulation and Market Supervision
Menichetti, October 2017 4 Financial Markets
Financial Markets • Bond Markets • Stock Markets • Foreign Exchange Markets • Markets for Alternative Investments • International Financial Markets
Structure of Financial Markets • Primary and Secondary Markets • Exchanges and Over-the Counter Markets • Money and Capital Markets • Spot and Forward Markets Source: Mishkin & Eakins (2016).
Menichetti, October 2017 5 Financial Center Geographical location (1) that has a heavy concentration of financial institutions, (2) that offers a highly developed commercial and communications infrastructure, and (3) where a great number of domestic and international trading transactions are conducted. London, New York, and Tokyo are the world's premier financial centers.
• Regional, national, international financial center • Global financial center: direct access from all over the world • Niche financial centers: Corporate Finance, Asset Management, FX, Derivatives, Trade Finance, Project Finance etc. • Onshore vs. offshore financial centers Source: Zomoré (2007); Mishkin & Eakins (2016).
Menichetti, October 2017 6 Leading Wealth Management Centers (2015) - International Private Client Market Volume
MARKET VOLUME (IN USD TRILLION AND AS PERCENTAGE OF MARKET SHARE)
Source: Deloitte (2015). Growth in Wealth Management Market Volume (AuM, 2008-2012 and 2012-2014)
CHANGE IN INTERNATIONAL MARKET VOLUME FOR TWO PERIODS
Source: Deloitte (2015). Financial Intermediaries and Institutions Financial Intermediaries: Entities that intermediate between providers and users of financial capital.
Two types of information reusability Cross-sectional: The same information can be utilized across different users Intertemporal: The same information can be reused through time
For a given attribute, the larger the grid, the more compelling the need for the broker For a given size grid, the less readily observable the attribute (the more subtle the signal), the more important the skills and reputation of the broker, e.g., phone books vs. security analysts or loan officers
Source: Greenbaum, Thakor, & Boot (2016).
Menichetti, October 2017 9 Services provided by Financial Intermediaries
Source: Greenbaum, Thakor, & Boot (2016).
Menichetti, October 2017 10 Financial Institutions
• Banking Industry • Mutual Fund Industry • Insurance Companies and Pension Funds • Investment Banks • Venture Capital and Private Equity Firms • Hedge Funds • Security Brokers and Dealers • etc
Source: Mishkin & Eakins (2016).
Menichetti, October 2017 11 Regulation and Market Supervision
Objectives of Regulation • Safety and soundness of individual institutions • Stability of the financial system • Market structure and competition • Consumer protection • Credit allocation • Monetary control
Source: Greenbaum, Thakor, & Boot (2016).
Menichetti, October 2017 12 Outline
What is a Financial Market?
Liechtenstein: Entrepreneurial Economy and Financial Market
Studying Finance in Connection with an Asset Management Hub
Menichetti, October 2017 13 Overview Area 160 km² / 61.8 mi² (6th smallest country worldwide)
Capital Vaduz
Inhabitants 37‘810 (2016)
Currency Swiss Francs (CHF)
Official Language German
Head of State Prince Hans-Adam II. of Liechtenstein
Head of State (regent) Hereditary Prince Alois of Liechtenstein
Head of Government Prime Minister Adrian Hasler
Export of goods 3'453 million CHF (2014)
GDP (nominal) 6‘105 million CHF (2014)
GDP per capita 163‘384 CHF* (2014)
GNI 4‘962 million CHF (2014)
GNI per capita 132‘795 CHF (2014)
Religion 80% Roman Catholic, 7.3% Protestant
Source: Statistical Office Liechtenstein * approximately 50% inward commuters employed
Menichetti, October 2017 14 Relationships
Switzerland – Liechtenstein Liechtenstein – European Union
. Customs Union with Switzerland since 1923 . Liechtenstein is official EFTA member since 1991 . Since 1921 Swiss Franc is used as the official currency . Liechtenstein is part of EEA since 1995 . Currency Union Treaty with Switzerland signed in 1980 EEA is formed by the 28 EU-members > National Bank of Switzerland is also the central plus Liechtenstein, Iceland, Norway; bank of Liechtenstein Switzerland is not member in the EEA . The freedom of movement for goods, services, persons (with restrictions) and capital within the EEA is applicable in Liechtenstein
Source: Office of Economic Affairs Liechtenstein
Menichetti, October 2017 15 Facts and Figures – Employment
Distribution of Employment in Liechtenstein
Total Employed 37‘453 (100%) of which are: Residents Employed 17‘214 (46.0%) Inward Commuters 20‘239 (54.0%)
Full Time 26‘864 (74.2%) Part Time 9‘360 (25.8%)
Full Time Equivalents 32‘122 (100%) of which are: Men 20‘893 (65.0%) Women 11’229 (35.0%)
Liechtensteiners 9‘545 (29.7%) Foreigners 22‘576 (70.3%)
employed in: Sector 1 (agriculture) 221 ( 0.7%) Sector 2 (industry) 13‘486 (42.0%) Sector 3 (services) 18’415 (57.3%)
Source: Statistical Office Liechtenstein (2016)
Menichetti, October 2017 16 Facts and figures - Employment
Total Employed and Inward Commuters
Total Employed
Inward Commuters
Source: Statistical Office Liechtenstein (2016)
Menichetti, October 2017 17 Employment – Comparison
Employment Structure
Liechtenstein Switzerland Austria Germany Luxembourg
Resident Population 37‘810 8‘417‘700 8‘772‘865 82‘175‘700 590‘667
Total employed 37‘453 4‘604‘000 4‘220‘000 43‘595‘000 405‘700
% of inward commuters 54.0% 6.9% 43.0%
Quota (total employed to 99.1% 54.7% 48.1% 52.1% 68.7% resident population)
Employment Distribution
Sector 3 (Services)
Sector 2 (Industry)
Sector 1 (Agriculture)
Liechtenstein Switzerland Austria Germany Luxembourg
Source: Statistical Office Liechtenstein (2016)
Menichetti, October 2017 18 Gross Domestic Product comparison
Liechtenstein Switzerland Austria Germany Luxembourg
Area in km2 160 41‘277 83‘871 357'022 2‘586 Liechtenstein compared to (in %) (100.00%) (0.39%) (0.19%) (0.045%) (6.19%)
GDP nominal (2014) 6.66 702.71 438.38 3’879.28 66.30 in billion current USD (100.00%) (0.95%) (1.52%) (0.17%) (10.05%) Liechtenstein compared to (in %)
GDP/capita (2014) 179‘478.6 85’814.6 51’322.6 47’902.7 119’172.7 in current USD (100.00%) (209.15%) (349.71%) (374.67%) (150.60%) Liechtenstein compared to (in %)
Resident Population (2016) 37‘810 8‘417‘700 8‘772‘865 82‘175‘700 590‘667 Liechtenstein compared to (in %) (100.00%) (0.45%) (0.43%) (0.05%) (6.40%)
Currency Swiss Franc (CHF) Swiss Franc (CHF) Euro (EUR) Euro (EUR) Euro (EUR)
German, French, French, German, Official Language German Italian, Rhaeto- German German Luxembourgish Romanic
Source: World Bank (2016), CIA Fact Book, Statistical Office Liechtenstein (2016)
Menichetti, October 2017 19 Financial Market Liechtenstein
Financial Intermediaries and Authorities in Liechtenstein
. Banking Sector (Liechtenstein Bankers Association, LBA): 16 banks . Insurance Sector (Liechtenstein Insurance Association, LVV): 33 insurance companies . Investment Fund Sector (Liechtenstein Investment Fund Association, LAFV): 17 companies . Asset Management Sector (Association of Independent Asset Managers in Liechtenstein, VuVL): 86 members . Professional Trustees and Fiduciaries Sector (THK): 396 companies
. Financial Market Authority (FMA)
Source: Liechtenstein Bankers Association
Menichetti, October 2017 20 Current Challenges for the Liechtenstein and Switzerland Financial Centers
Banking regulation 58 % Bad debts 5 %
Digitalization 26 % Margin pressure
11 %
Source: Finance Forum Liechtenstein 2017 Advantages in Liechtenstein
The Liechtenstein Financial Market
. Large potential of specialists and experts from Switzerland, Austria, and Germany . Stable social, legal, and economic order . High degree of political continuity and stability . Liberal economic policy and company law . Moderate corporate taxation . Solid financial policy of public budgets . Free access to markets in Europe . Manageable size . Flexibility and short decision-making paths . Large capital power of the public sector . AAA country rating by Moody's and Standard & Poor's . Niche products compatible with European law
Source: Finance Liechtenstein
Menichetti, October 2017 30 Literature
Deloitte (2015). The Deloitte Wealth Management Centre Ranking 2015. Zürich: Deloitte Consulting AG.
Greenbaum, S.I., Thakor, A.V., & Boot, A.W.A. (2016). Contemporary Financial Intermediation (3rd ed.). Amsterdam: Elsevier.
Mishkin, F.S., & Eakins, S.G. (2016). Financial Markets and Institutions (8th ed.). Boston: Pearson.
Zomoré, A. (2007). Concepts of Offshore Financial Centers: In Search for an Operational Definition. IMF Working Paper WP 07/87, Monetary and Capital Markets Department. Washington: International Monetary Fund.
Internet Sources: CIA Factbook; Finance Liechtenstein - www.finance.li; Financial Market Authority Liechtenstein; Office of Economic Affairs Liechtenstein; Statistical Office Liechtenstein (2016); World Bank (2016)
Menichetti, October 2017 31 Outline
What is a Financial Market?
Liechtenstein: Entrepreneurial Economy and Financial Market
Studying Finance in Connection with an Asset Management Hub
Menichetti, October 2017 32 12-month-season for sports and leisure
38‘000 career opportunities in Liechtenstein
Among the most peaceful countries on earth: Austria #4, Switzerland #5 (no data for Liechtenstein, © Institute for Economics and Peace 2013) 1000 students only
1:12 lecturer/student-ratio (average for BSc and MSc programs)
2 BSc, 4 MSc, 2 PhD programs in Business Economics and Architecture
Excellent prospects. Welcome to the University of Liechtenstein. Master of Science in Finance (MSc)
Duration 4 semesters (full-time programme) Credits 120 ECTS Language English Tuition fees CHF 850.– per semester Lecture days Tuesday, Thursday, Friday, occasionally Saturday
The department of Business Economics is in the process of AACSB accreditation, which is scheduled to be obtained (latest) in 2019. Why study Finance in Liechtenstein? > In the heart of Europe with international finance and business know-how > Programme Focus: Risk and Asset Management, International Finance > Programme entirely in ENGLISH, excellent employment rates of our graduates > Personal learning environment through low professor/student-ratio > Member of the CFA University Recognition Program, CFA Institute Research Challenge > Member of the GARP partnership of risk education > Projects and MasterLABS with the financial industry (i.e. asset management firms, banks, insurance companies, Fintech companies, Financial Market Authority) > International study group of around 40 students > Educational journey to leading financial centers in the world > Suitable preparation for a PhD program > Attractive tuition fees (state-funded); 2 scholarships per year by LGT Foundation Semester structure
1st semester Fundamentals Cross- 2nd semester Risk and Asset Management faculty elective subjects
3rd semester Investments English 120 120 ECTS (12 ECTS) 4th semester Master Thesis
This MSc in Finance has been accepted into the CFA Institute University Recognition Program, as the programme covers at least 70% of the CFA Program Candidate Body of Knowledge (CBOK). 15 partial scholarships per year are provided for Master students, who wish to pass the CFA exam level 1 – 3.
This MSc in Finance also has been accredited by GARP (Global Association of Risk Professionals) as a partner in risk education. 1 full scholarships can be offered to students for the FRM/ERP exam. Curriculum – MSc in Finance The CHAIRS you are dealing with
Banking and Financial Management Exchange Rate Risks Prof. Dr. Marco J. Equity Investment Management Menichetti Sustainable Investments Finance Prof. Dr. Quantitative Finance Michael Empirical Finance Hanke Behavioural/Experimental Finance
Prof. Dr. Marco J. Menichetti Academic Director
Florian Schaller, MSc Executive Director, MSc in Finance Hilde Zimmermann Programme Administrator Additional Offers
> LGT University Scholarship > CFA Exam Scholarships > Participation in CFA Institute Research Challenge > GARP Exam Scholarship > Banking Award Liechtenstein > Career Day in Finance – Workshop with leading employers of the financial industry
> Extracurricular Activities: > After Work Lectures for Asset and Investment Professionals > Participation in Workshops and Conferences organised by Liechtenstein House of Finance Professional Career Paths
> Asset and Capital Management Firms, Wealth Management > Banks and Central Banks > Insurance Companies > Investment Undertakings > Financial Advisors and Family Offices > Finance Departments of non-financial Companies > Consulting Firms > Regulatory Authorities and Financial Market Authorities
20% of our graduates find their job within Liechtenstein, another 20% within the region. Until now, every graduate had a job by graduation. Partner companies and career opportunities (choice)
Menichetti, October 2017 44 Educational Journeys & Excursions
. Educational Journey 2018 New York: Banks, Asset Management companies, United Nations, Princeton University, NYSE, SEC,… Singapore & Kuala Lumpur, 2011
Beijing & Shanghai, 2015
Hong Kong & Singapore, 2017
New York & Chicago, 2013 . Excursion: • Portfolio Management Game at a foreign university • Banking Game in cooperation with Kosminski University, Warsaw. Finance Alumnis - go international
Viktor Tsekov MSc Anete Berzina MSc Counterparty Risk Economist at Department Bank of Latvia Barclays Investment Bank RIGA LONDON
Dirk Frohnert MSc Sebastian Venc MSc Portfolio Manager at Investment Banking JPMorgan Asset Analyst at Management Robert W. Baird & Co. Jiri Chroustovsky MSc LONDON FRANKFURT Real Estate Advisory at Deloitte PRAGUE Patrick Prinz MSc Analyst Corporate and Investment Banking at Anke Sielker MSc Citigroup N.A. Senior Business Development ZURICH Associate AIR Worldwide MUNICH Marina Vasileva MSc Fund Officer at CAIAC Fund Management Thomas Gartlacher, MSc, VADUZ Treasury Department, Risk Manager Plus many alumni with Liechtenstein Hilti AG financial services companies (LGT, LLB, VADUZ VPBank, Raiffeisen Bank Liechtenstein, Valartis Bank, insurance companies, asset management firms, market authority etc.) Admission requirements
> Bachelor’s degree or an equivalent diploma degree in Business Administration, Economics, etc. with at least 180 ECTS. > Performance above average in the undergraduate study programme > English language skills at proficiency level B2 (CEFR) is required (level C1 is desirable) if your mother language is not English > Academic writing skills > Motivation for the chosen Master Application and admission procedure
Online application www.uni.li/master-finance Application 30th June – EU/EEA and Swiss citizens deadline 31st March – citizens from other countries (a visa for Liechtenstein is required) Personal interview we want to get the full picture
Application on www.uni.li/master-finance Master‘s degree programmes in Liechtenstein
Master / MSc Online application Contact Application deadline
Florian Schaller, MSc Finance www.uni.li/master-finance [email protected] Winter intake ONLY 30. June EU/EEA + Swiss citizens Dr. Matthias Filser 31. March citizens from other countries Entrepreneurship www.uni.li/master-ent [email protected]
Winter Prof. Peter Staub Architecture www.uni.li/master-ar 30. June EU/EEA + Swiss citizens [email protected] 31. March citizens from other countries
Roope Jaakonmäki, MSc Summer uni.li/master-information-systems Information Systems [email protected] 30. Nov. EU/EEA + Swiss citizens
Business Business Economics 30. Sept. citizens from other countries Student organisations
> Organize sporting and cultural activities, participation in international competitions, social activities and parties > Provide support in academic life and career opportunities Join the conversation!
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linkedin.com/company/universit-t-liechtenstein/ Principality of Liechtenstein Two Events for prospective Students
University Information Day Saturday, 25.11.2017, 13:00 – 17:00 Visit the University, have a personal talk with Finance students and meet the study directorate.
Try Out – Get your own Picture Friday, 23.02.2017, 9:00 – 14:00 Visit regular lectures in the morning, have lunch with students and meet the study directorate.
Menichetti, October 2017 53 Thank you! Contact: [email protected]
www.uni.li
Menichetti, October 2017 54