Irish EU presidency is a chance to shape investment regulation – BNY Mellon
Ireland’s Presidency of the EU this year represents a unique opportunity to shape future regulation, as assets serviced locally reached an all time high at the end of 2012, according to Rachel Turner, head of Offshore for BNY Mellon.
“One of the greatest challenges facing the Irish funds industry in 2013 is increased regulation at both a global and local level. How quickly the industry adapts to these changes will be critical to maintaining the upward growth trajectory enjoyed in recent years,” she said.
The much debated Alternative Investment Fund Managers Directive (AIFMD) will come into effect in July. The changes have long been anticipated, but a much tighter timetable following the completion of Level II measures at the end of last year will test how prepared investment managers and service providers really are.
“Whatever the pros and cons of AIFMD, there is no doubt it will represent a significant sea change for the funds industry in Ireland,” said Turner
“It will transform how funds are managed, how we provide services, as well as the number of services a fund will require. As a result, the pressure in the new operating environment will be on providers to offer the full A to Z of complimentary services to investors.”
She said the industry had an opportunity to “react and adapt” quickly to ensure continued growth. It should leverage the implementation of AIFMD to expand its capabilities beyond fund administration and custody, by, for example, introducing risk management services.
The Shadow Banking Review will also challenge the industry. It will examine money market funds and adjust how these funds are priced and constructed.
BNY Mellon as both manufacturer of and service provider to Money Markets funds, is working with all stakeholders to assess the implications of the various solutions. “There is no one obvious solution but we expect greater clarity later this year,” Turner explained.
She said no other EU country has the in-depth knowledge and experience of the funds industry built up over a number of decades. “The inclusion of a number of key agenda items will give us a front row seat over the next six months. I expect Ireland to take a leading role in shaping Ucits V and ensuring its successful implementation over the duration of the Presidency.”
“Ucits VI will follow this, and although we will no longer hold the Presidency when this comes into effect, the Irish Presidency will need to make significant progress in laying the groundwork for the next iteration of thes directives. My hope would be that Ucits VI will see a greater drive towards harmonisation within the funds industry, taking on board the lessons learned from past directives and building it into this new legislation.
She said Ireland also needs to target emerging distribution markets such as South America and the Middle East, plus raise its profile in Asia.
Assets serviced by the Irish funds industry reached an all-time high of €2trn in 2012. Over 40% of Ucits asset flows in Q1 2012 came through Irish vehicles, with 10% growth in net assets of Ucits in the first half of last year.
“I firmly believe that this is down to the fact that Ireland is still seen as a good place to do business from a funds perspective, despite the financial crisis,” said Turner. “We are still seeing a huge appetite from investors to place money in Ireland, so I am optimistic that we will reach €2.5trn in assets serviced by the Irish funds industry by the end of 2013.
She believes Ireland has been able to adapt quickly to challenges over the years “because we have had the intellectual capital at our disposal to cope with some of the more complex funds in the market”.