A new survey raises concerns that Irish stocks could become increasingly marginalised as a result of the euro with proportionately less Irish equities now being held by fund managers.

Research commissioned by IBI Corporate Finance cites the primary reasons for the decline in investment in Irish equities include a lack of new investment opportunities, dissatisfaction with the breadth of market exposure available through the main Irish stocks, and a view that it is "unhealthy" to be exposed to the Irish economy even if it is doing well.

Scale was given as another factor as relatively few Irish companies are big enough to warrant the attentions of international fund managers.

Investment levels were also affected by the reduced need for companies to raise equity finance in a booming economy or to match assets and liabilities and an increasingly marginal distinction between the main Irish stocks and other international companies. These factors were influencing investment decisions before Ireland joined economic and monetary union (EMU), according to the research. But EMU was the catalyst which accelerated the process of declining investment in Irish equities.

The research was carried out by Irish Marketing Surveys and was based on interviews with the largest Irish institutional investors over the past two months.

"It was felt that new foreign investors into euro stocks are particularly likely to favour only the largest and best known companies. There is a corresponding risk that second tier equities may face difficulties finding buyers."

"Ireland remains however, a marginal and small scale market and maintaining significant interest in Irish companies requires active marketing effort," the research states.

Another trend will be the increasing use of non-Irish broking houses which should put pressure on domestic stockbrokers as investors diversify their holdings.