The funds industry is one of the great success stories of the Irish economy. From humble beginnings in the early 1990s, the region has become a global player. According to statistics from the Irish Funds Industry Association, it services assets in excess of €1,941 billion and employs over 11,000 people.
But what next for this popular fund domicile? In March, the Irish government approved in principle the development of legislative proposals for a new corporate structure. The SICAV proposals will meet US regulatory checkbox requirements and reduce administrative costs on funds. This move has been welcomed by the Irish Funds Association, as the proposals seek to develop the funds industry in Ireland further and promote employment and business opportunities.
With the Irish market growing rapidly, in 2011 it attracted some €60 billion in new UCITS monies. According to the European Fund and Asset Management Association (EFAMA), this is twice as much as all other domiciles put together. In fact, in the last quarter of 2011, Ireland attracted five times more in new UCITS monies than all other domiciles combined.
The new corporate structure for the fund industry is expected to make the region even more attractive to managers on a global basis, especially in the US. Currently, Irish-domiciled funds tend to trade as either public companies or unit trusts. Under the proposals, while the public listed company structure would still be available to fund providers’, there will also be the option of converting to the new framework.
In a recent Deloitte survey of Irish Fund Administrators, respondents identified market uncertainty, regulatory change, cost and fee pressures, operations and service levels as key strategic and operational issues. It is expected that the new structure will lead to lower costs and less administration – a major attraction in the current climate.
EFAMA figures show Luxembourg’s share of the UCITS and non-UCITS market in Europe dropped from 27.4 per cent to 26.5 per cent last year. Ireland’s European market share, meanwhile, rose from 12 per cent to 13.3 per cent. The two leading jurisdictions are also the main locations for the domicile of UCITS hedge funds and the Irish funds industry’s expertise in traditional hedge funds might give it an edge in attracting hedge fund UCITS.
The proposed legislation is likely to be enacted by the end of 2012, improving the flexibility and attractiveness of the Irish funds industry, well ahead of implementation of the Alternative Investment Fund Managers Directive (the proposed European Union law which will put hedge funds and private equity funds under the supervision of an EU regulatory body) in July 2013.
All eyes are on the Irish fund industry; will it continue to go from strength to strength?