A Special Report is content that is edited and produced by the Special Reports unit within The Irish Times Content Studio. It is supported by advertisers who may contribute to the report, but who do not have editorial control.

Funding the future

Ireland is home to 5 per cent of worldwide investment funds assets, making it the third largest global centre and the second largest in Europe

Technology is playing an ever increasing role in asset management. Photograph: Getty Images

Technology is playing an ever increasing role in asset management. Photograph: Getty Images

 

Ireland is home to 5 per cent of worldwide investment funds assets, making it the third largest global centre and the second largest in Europe, after Luxembourg.

More than 14,000 people are currently directly employed in the funds industry here. The majority are based in Dublin but operations are in fact well spread across the country too, with funds-based enterprises in 12 counties.

The number of funds domiciled here – authorised and regulated by the Central Bank of Ireland – is just over 6,700, with assets of almost €2.4 trillion.

More than 500 different asset managers from around the world have established these 6,700 investment funds in Ireland. While the majority of the investment- and portfolio-management is done outside of Ireland, what Ireland specialises in is fund administration, the ongoing valuation, fund accounting and processing of records relating to each fund.

As the industry has grown and developed here over the past 30 years, it has given rise to a phalanx of specialist support services, from auditing and financial, to legal, cyber security, risk, compliance and anti-money laundering.

The role the Central Bank, as regulator, plays has been a very significant part of the story too, authorising funds in line with European regulations and then providing ongoing supervision of them.

The Central Bank of Ireland is held in very high regard internationally, a fact reflected in its appointment to the chair of the investment management standing committee of ESMA, the European Securities and Markets Authority, which oversees the implementation of rules across 28 EU states. It has held this position for a number of years.

The Irish Funds Industry Association, a representative group, has about 130 members. Of these, the majority are based in Ireland.

What is significant about the industry here is that, similar to that in Luxembourg, it supports funds that are sold to people across the world, from the UK to Singapore. By contrast, while countries such as the UK, France and Germany have very significant funds under management, the vast majority of theirs are domestic, that is, a German fund made up of German investors.

Consequently, Ireland has a very high degree of expertise and experience in global, cross-border funds administration and a reputation for being fast and efficient in the provision of these services – two highly valued attributes.

Ireland is also English-speaking and working off a common law legal framework. This – and a favourable time zone – makes it a particularly good match for supporting the world’s biggest asset-management centres, London and New York.

A further card playing in Ireland’s favour is the fact that technology is playing an ever increasing role in asset management. It just so happens that fintech, the niche where financial services and technology meet, is something Ireland also excels in.

This is thanks to the natural advantage of having a thriving international financial services industry here, based primarily around the IFSC, that includes not just the funds industry but banking, insurance and aviation leasing. On top of this is overlaid the IT skills that come from having the world’s top tech firms, such as Google and Facebook, located here too.

That all this augurs well for the economy here generally is underscored by the fact that Ireland’s funds industry was one of the few sectors to have ridden out the domestic financial crisis unscathed. And while the number of international domiciled funds and assets went down briefly in 2008/9, they have grown significantly every year thereafter.

The future looks bright too. The Government has ambitious plans to double the number of people employed in the funds industry under IFS 2020, points out Kevin Murphy, co-head of theAsset Management and Investment Funds Group at law firm Arthur Cox.

“Achieving that goal will require steel and determination from the Government to continue to drive the regulatory changes needed to ensure we remain a competitive funds domicile and to call out those who do not support that job-creating agenda at a time when Ireland needs to mitigate against the broader impacts of Brexit on our economy,” says Murphy.

Star performers

A few years ago, the then Taoiseach, Enda Kenny, described the funds industry in Ireland as one of the star performers of the Irish economy. “That has not changed and will not change unless Ireland allows that to happen through complacency,” says Murphy.

Yet despite the shout out from a former Taoiseach, the funds industry remains an unsung success story, reckons Brian Clavin, a partner in the Financial Services group of KPMG.

“I suspect people in Ireland are unaware of the size and success of the Irish funds industry here and of the depth of the jobs – and the secondary jobs – arising from it. It is also more spread out around the country than people may think. It’s not just in Dublin. Northern Trust, for example, is now one of the biggest employers in Limerick. ”

Most of the world’s main asset-services companies are already here and, when such employers ramp up, they do so in sizeable chunks. “They tend to take on hundreds at a time,” says Clavin. The growth of Northern Trust in Limerick bears this out. It has grown significantly in recent years, and currently employs 1,100 people.

“So the industry is a very big employer, and a very big tax provider, but it’s very low profile. Everybody knows Google employs thousands, but they don’t know that, for example, State Street does too. The funds industry in Ireland offers all these very attractive, high-paying jobs, but half the population doesn’t know it exists,” says Clavin.