Reviewing the Irish turnaround story
The Irish fund industry can look back on a record-breaking year, and even claims to be the most successful domicile in Europe. But how?
On 16 March, John Bruton – Irish Prime Minister, EU ambassador to the US and president of the International Financial Services Centre (IFSC) Ireland – addressed hundreds of US asset managers at the New York Athletic Club. He was leading the Irish funds industry’s latest trade mission to the US.
“Funds, exports and foreign direct investment into Ireland all experienced record growth last year,” Bruton told guests. “Some 148 new foreign direct investments were made in Ireland in 2011, up 17% on 2010 and 41% of investments came from first-time investors to Ireland, up 30% on 2010.”
In 2011, Ireland was clearly the managers’ domicile of choice, attracting twice as much in new Ucits money as the rest of Europe put together – and five times more in the last quarter. Irish Funds Industry Association spokeswoman Angela Madden says international business in Ireland in general “has never been better”.
Leading the way
The country is the number one centre globally for the servicing of hedge funds, serving (by assets) some 40% of the world’s hedge funds.
On the retail side, Ireland experienced the highest net inflows into Ucits of all fund domiciles, attracting €62bn in 2011, almost €50bn more than the UK, the next most successful domicile. Over the past 11 years the net assets of Irish Ucits have grown more than 500%.
What has driven the success of the Irish fund industry, following the 2010 bailout? Madden is keen to stress the insulation the industry has enjoyed from the banking sector’s difficulties.
“There are two very distinct economies: the domestic and the international economy,” Madden says.
“The funds industry is an international business, and so has been very well insulated from the domestic crisis. In fact, the domestic crisis has resulted in some benefits such as falling office costs and so on.”
Rachel Turner (pictured), BNY Mellon’s head of fund services for Ireland, agrees. “After the financial crisis, the IFSC took a lot of time to explain to the clients that this was an inward-facing issue, relating to the domestic economy.
“The promoters and investment managers we deal with quickly recognised the fund industry was well insulated from the domestic banking crisis. As the broader eurozone crisis has continued, we have had continue to emphasise this point.”
Turner suggests the Ucits regime has been particularly beneficial for the Irish funds industry.
“We need a brand that works for cross-border distribution. Ireland has benefited hugely from having a constant standard that can be sold internationally,”she says.
“We have strong experience in new products within Ucits, including some of the more alternative funds.”
As Ireland competes in an international market place the servicing of offshore-domiciled funds will be of increasing importance.
“The servicing of Cayman funds has been very important, and I see that continuing,” says Turner.