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Ireland a magnet for fund managers

Brexit to boost already thriving sector

Brexit presents significant opportunities for Ireland to expand its financial services and fintech sectors. Photograph: iStock

Brexit presents significant opportunities for Ireland to expand its financial services and fintech sectors. Photograph: iStock

 

The Irish funds industry surpassed €4 trillion of assets under administration in 2017, with 18 of the top 20 global asset managers having Irish-domiciled funds.

Ireland’s immense attractiveness as a place to establish or service an investment fund is based on a unique combination of factors. These include a transparent regulatory environment, an efficient tax structure, business culture, language, as well as access to a skilled workforce experienced in the funds industry.

As a result of Brexit, Ireland is becoming an even more desirable location for fund management companies.

This demonstrates significant expertise in the sector, according to BDO audit director Turlough O’Brolchain, who says in order to ensure Ireland continues to be a location of choice for investment funds, “the continued evolvement of the industry and sector, including the establishment of robust fund structures such as the Irish Collective Asset-management Vehicle ( ICAV), loan origination funds and the proposed reforms to the Investment Limited Partnership legislation are necessary to fend off considerable competition for market share from other jurisdictions such as Luxembourg”.

The last decade has seen a significant change in the regulatory landscape, Sarah Maguire, partner at law firm Walkers, says. “While this has presented challenges, Ireland has risen to these challenges as opportunities. Service providers have enhanced service offerings to provide more user-friendly and cost-effective compliance solutions and new entrants have entered the market offering bespoke management solutions.”

She says that Ireland, as a funds domicile, has a proven track record and has brand recognition which other jurisdictions have not necessarily been able to achieve. “This gives fund managers and investors a level of comfort. Like every industry, there is also the human element – people like doing business with the Irish, they like spending time in Ireland and Ireland is easy to fly into and out of.”

Meanwhile, Brexit is producing many opportunities.

Gareth Bryan, partner at KPMG Ireland, says that depending on what kind of post-Brexit trade deal is negotiated with the EU, it is possible UK fund managers might not be able to manage EU funds. “If this happens, it is likely that many UK managers will open operations elsewhere in the EU. In this context, Ireland should be a very attractive option for those UK managers, given the strong cultural links, excellent transport connections and common legal framework.”

Continue to innovate

He says Ireland should continue to innovate in relation to its fund product offerings, particularly with a view to attracting those segments of the industry where Irish funds are currently used less frequently, such as private equity.

“This involves updating older legislation and introducing alternative legal structures which are better suited to those parts of the market,” he says.

O’Brolchain agrees that Brexit presents significant opportunities for Ireland to expand its financial services and fintech sectors. He says financial institutions also need to consider the impact of Brexit on the provision of their client services and focus on ensuring minimum disruption of service. “We are advising many of our clients on how best to prepare for Brexit, taking into account likely changes in taxation, supply chain, customs tariffs and regulation,” he says.

Cormac Commins of Arthur Cox’s Asset Management and Investment Funds Group says Ireland offers certainty to managers who wish to be able to continue to market their products and services across Europe using the EU passports, post Brexit.

“The Central Bank of Ireland’s fund management company guidance also represents a considered and comprehensive regime for Irish firms that outsource certain activities outside of the EU,” he says.

Meanwhile, institutional investors such as pension funds are increasingly looking to diversify their portfolios away from “traditional” asset classes, towards liquid alternatives, private equity and “real asset” strategies, says Ian Dillon of Arthur Cox.

“Recent product innovations such as ICAV, a vehicle tailor-made for investment fund products, have been extremely successful in meeting this market demand. In addition, work is ongoing on reforms to Irish limited partnership legislation for those investors and managers who are more used to using partnership vehicles for their investments in private equity/venture capital, development capital and infrastructure,” he says.

Maguire says a clear, transparent and efficient approval process for companies considering a relocation to Ireland is key to successfully attracting them. “Early engagement in regulatory initiatives at both a domestic and European level is key to maintaining success and fostering future growth, particularly in a post-Brexit era.”