Influx of private equity boosts Irish asset management sector

Growth in international private-equity interest in Irish assets – mainly from the United Kingdom and the United States – has led to more inbound private-equity activity of late. "Historically, foreign activity focused on the tech sector here but it has broadened out to other sectors," says Anya Cummins, partner at Deloitte corporate finance.

“Coupled with this interest is a greater understanding among Irish businesses as to what private equity is.”

Modern asset-management teams are now expected to know and understand the impact of global trends and undertake scenario planning to consider the effect of these uncertainties on their business. "And while this is possible in most large corporates, the strain on traditional SMEs has been significant as they struggle to keep up with the pace of change," says Katharine Byrne, BDO corporate finance partner.

As SMEs start to scale, Irish businesses have had to become used to internationalising early on in the growth phase, given the relatively small size of the domestic asset market. But things are changing. “For the first time, we’re seeing a pretty vibrant domestic private-equity economy with very active funds in the last few years.

Outbound activity

Irish corporates are engaging in more outbound activity too, particularly in the UK, Europe and the US. While their focus would have traditionally been on property, Irish asset-management experts are also branching out beyond bricks and mortar in their quest for a more diverse – and therefore shrewd – asset portfolio.

This has been particularly visible in the exchange-traded funds (ETF) market. Since the last quarter of 2016, there has been a continued propagation of this product, and has benefited from an environment characterised by rising markets and greater desire for liquidity and for low-cost products.

Ireland has traditionally been a home for ETFs in Asia and Europe – a trend which is set to grow further this year as more and more native investment managers start to offer up their own ETF or smart-beta products in 2017.

Brexit will have an impact on the asset-management landscape too. “International equity funds are carefully considering investments in the EU versus UK markets with an increased number of US buyers now looking to Ireland as its investment base into the EU,” says Byrne.

In addition, the EU-led Markets in Financial Instruments Directive (MiFID II) will likely impact asset-management decision-making in the coming year. This EU legislation regulates firms who provide services to clients linked to financial instruments. MiFID was originally applied in the UK back in 2007, but has been revised to improve functionality in financial markets since the financial crisis as well as strengthen investor protections. A number of legislative changes will come into play starting in January 2018.