More than 8,800 financial services companies are operating from Ireland today, including the top 20 global institutions. The investment funds industry makes a €994 million direct tax contribution to the Republic’s exchequer, with approximately 20,000 full-time professionals working in the sector.
“With €6.7 trillion in assets under administration and €5 trillion in Irish domiciled funds, Ireland’s investment funds and asset management sector plays a vital role in enabling global investment within Europe and further afield,” says James Allis, country head, Ireland, at Waystone.
The growth of this sector hasn’t happened overnight. It has been more than three decades in the making.
“One of the contributing factors to the success of the funds and asset management industry is the commitment and support of successive Irish governments over the last 30-plus years, which has positioned Ireland as a geopolitical stable environment offering openness and confidence across global financial markets,” says Allis.
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However, Brexit certainly gave us a boost, leaving the State as the only native English-speaking jurisdiction with a common law system in the EU, says Mary Ruane, partner, asset and wealth management leader, at PwC Ireland.
“Post-Brexit, Ireland’s attractiveness for doing business has surged, with asset managers increasingly establishing substantial operations, particularly in risk, compliance and oversight roles,” she notes. “Ireland’s comprehensive ecosystem of skilled professionals, including independent non-executive directors, auditors, legal experts and asset servicers, supports ease of business and cross-border distribution.
“Additionally, Ireland’s extensive tax treaty network, strategic geographic location and deep talent pool further enhance its appeal, contributing to the sector’s robust growth.”
Nevertheless, success is not a given, as Ruane suggests.
“Globally, competition is intensifying as many jurisdictions seek to replicate Ireland’s success, particularly in the ETF market,” she says. “To stay at the forefront and maintain our standing on the global stage as a domicile for funds and a location for corporate businesses, Ireland must continue to innovate in newer growth areas such as private assets and digital assets, both from a regulatory and product perspective, as well as more traditional areas such as ETFs where Ireland is the leading jurisdiction in Europe and the second largest domicile globally, after the United States.”
She furthermore identifies “rising costs, fee compression and the need for sustainable investing” as pressing concerns.
Nicholas Blake-Knox, chair of the Irish Funds Industry Association and head of asset management and investment funds at Walkers, says: “The types of investment products that investors are looking for are continuously evolving and it’s really important that Ireland keeps pace and has the capabilities that investment managers and global asset managers need to establish those products here.”
Embracing technology will be a key part of the evolution of the sector, as will aligning regulatory capacity with that.
Ruane suggests that “leveraging fintech and regtech solutions can enhance operational efficiency and regulatory compliance”.
“Ireland’s reputation as a leading jurisdiction for technology firms in EMEA should be tapped into also and explored to seek further collaboration with the Irish asset management industry for the mutual benefit of both sectors,” she says.
Tax system reforms could be the key to unlocking public appetite for investment.
“Changes to the tax system are essential to encourage Irish people to invest in products such as exchange-traded funds. Simplifying the tax treatment of ETFs, including addressing the deemed disposal rule, can make these investment options more attractive to retail investors,” says Ruane.
Private assets, ETFs and digitalisation are all key strategic priorities for the Irish Funds Industry Association and have been included in its recently adopted three-year strategy, says Blake-Knox.
“It is important to emphasise that the investment funds that are set up in Ireland serve a very broad range of investors – everybody from retail investors that are saving through their pension funds all the way up to large institutional investors,” he says.
“And one of the trends that we‘ve seen over the last couple of years is the demand from retail investors to access higher-returning investment products such as alternatives and private market assets.”
Ireland implemented its European long-term investment fund (ELTIF) regime last year, which makes retail alternative investment fund (AIF) products available to investors “looking to allocate less liquid assets to achieve better returns”.
“Further work is ongoing to consider how this retail AIF opportunity may be further developed here outside of the ELTIF,” says Blake-Knox.
Meanwhile Blake-Knox sees opportunities in technologies for the tokenisation of funds emerging, and the use of distributed ledger technology instead of the traditional shareholder register as presenting significant opportunities for asset managers and investors alike.
“The way investors are looking to invest is evolving through the use of apps and other technology and it is imperative that Ireland keeps up with the pace of change if we are to continue to be a leader in the investment funds and asset management sector,” he says.
He is enthused by the approach of the Central Bank, which has invested resources in innovation, made a senior hire in this area and rolled out a regulatory sandbox recently.
“It’s critically important that we continue to innovate, and important to remember that what has got us to this point won’t necessarily sustain us as we go forward unless we continue to innovate and be agile,” he says.
“We were very encouraged by the Government commissioning the Fund Sector 2030 report last year, which was published in October, and that really looks forward over the next five years to see what the funds and asset management industry here needs to sustain growth and be prepared for the future.”
Allis agrees that the implementation of the review’s recommendations will be critical to maintaining stability and driving growth, as will the programme for government. He also points to the European Commission strategy for the Savings and Investment Union (SIU) to improve the connectivity between savers and investments, and the implementation of the Alternative Investment Fund Managers Directive II as regulatory enhancements which “will facilitate further growth in the Irish private assets and alternatives funds offering”.
“Looking forward, it is imperative the sector is supported for savers, businesses and financial resilience within Ireland, and in the broader European landscape. An innovative and robust funds and asset management industry will drive an innovative economy and unlock the full potential of European capital markets,” he says.
