The post-Brexit period has demonstrated that Ireland’s funds industry is proactive and flexible. It also works very well with the Central Bank, its regulator. In an industry where good regulation offers a clear point of competitive advantage, that matters.
“The Central Bank of Ireland provides a tough but fair regulatory environment, which is an attraction for international asset managers,” explains Fionán Breathnach, who leads the Irish office of UK law firm Simmons & Simmons.
“They know that if they are operating in a robust regulatory framework, that is attractive to their investors.”
Post-Brexit not only is the industry seeing a lot of UK managers establishing funds in Ireland, but US asset managers are using Ireland as a springboard into Europe, where previously they would have used the United Kingdom.
“This is because of the common language here, the common legal system of common law and an approach to doing business that is aligned with the UK and US,” says Breathnach.
Ireland is the largest domicile for exchange traded funds (EFT) in Europe, home to more than 60 per cent of the total European ETF market. It is also Europe’s leading centre for alternative funds and the largest hedge fund domicile in Europe. Indeed, Ireland was the first regulated jurisdiction to provide a regulatory framework specifically for the alternative investment fund industry.
New investment limited partnership legislation, which came into law just more than a year ago, provides a regulated fund offering suited to private equity too, a growth sector.
Continued investment
It was one of the priorities of the Government’s Ireland for Finance strategy, designed to build on Ireland’s existing position as a global centre of excellence for funds and to enable competitiveness in a dynamic segment of the industry.
Continued investment in innovation is important, says Breathnach, including fintech, a sector that depends on a mix of technology, regulation and people. “We need to continue to invest in all three,” he says.
Cryptocurrency is an area of particular interest for Ireland. “We have the ideal product, in QIAIFs (qualifying investor alternative investment funds) for that investment class,” says Breathnach.
“In recent years one of the things the industry has been grappling with in relation to digital assets is around custody of them. The depositaries here have done a good job to get on top of that, so the path is there to look at crypto funds. There is an inevitability around them, and as an industry it is something we should be looking hard at.”
While the industry’s regulation is largely European, the manner in which we implement matters. “It’s really important that we don’t set ourselves apart,” says Donnacha O’Connor, managing partner and head of the asset management and investment funds at Dillon Eustace.
The funds industry depends on highly skilled personnel and has seen a number of people relocate here from the UK post-Brexit. For that to work Ireland has to compete on a work-life basis too.
“We need well-qualified staff to work in this industry and we are competing for them with other European jurisdictions in an industry that is very mobile. Wage inflation and the cost of living are all factors. People looking to come here look at the same things we look at. The price of homes, the availability of schools and tax all play a big part,” says O’Connor.
Big rival
Luxembourg is Ireland’s big rival. “What you have in Ireland and Luxembourg is a regulated product that can be sold throughout the EU. There is intense competition between the two because if you are coming into the EU, and want to launch an EU product, it’s one of those two countries you’ll be looking at,” says Kevin Murphy co-head of Arthur Cox’s Asset Management and Investment Funds Group.
“We have very responsive regulation. We’re English speaking and a lot of these managers are based in the US or UK. Our workforce is also very responsive to US work hours. The expertise we have built up over 30 years in international financial services has a very high reputation,” says Murphy.
“It is critical that we have a product range that allows us to be competitive with the likes of Luxembourg and that we do not become complacent in being a leading financial services sector in the EU post-Brexit.”
