Pat Lardner is leading the Irish Funds Industry Association in its engagement with the AIFMD, which heralds the arrival of regulated hedge funds. He speaks to Nick Fitzpatrick.
How is it that Ireland can turn its rock stars into financiers? It must be something in the air.
Though it is unlikely that Bono, who is co-founder of Elevation Partners, and Sir Bob Geldof, chairman of Africa-focused 8 Miles, both private equity firms, dreamt of a job in finance when they were at school, Pat Lardner possibly did. Since April 2012, Ireland-born Lardner has been the chief executive of the Irish Funds Industry Association (IFIA) following several years working in Asia.
Lardner is in a sweet spot, but it could easily turn into the wrong end of a shooting range. Ireland expects to dominate the globe in the next few years as the key service centre for regulated hedge funds and other alternative investments. The IFIA is at the head of this charge and it is the Alternative Investment Fund Managers Directive (AIFMD) that provides the battering ram.
Many would say the prize to be delivered by the AIFMD is not Ireland’s to win but to lose, such is the country’s already bulging market share as a hedge fund domicile and administrator.
Should Ireland win more business under the AIFMD, Lardner will inevitably take some of the credit. If Ireland’s nemesis, Luxembourg, trumps it, Lardner might wish he’d not returned to his homeland, at least not to this role.
If Ireland fails to become the domicile of choice in the alternatives sector, it could hardly be because it did not receive enough support from its regulator, the Central Bank of Ireland.
Most recently this was reflected in the May announcement by the regulator that the country had opened its doors for fund managers to apply to become AIFMD-recognised.
“The announcement was important and says that the jurisdiction is open for business,” Lardner says. Bono and Geldof should take note.
As well as regulatory support for both the AIFMD project and for the broader funds servicing industry in Ireland, the industry and the IFIA also enjoy political support. Politicians have turned out to cheerlead the Irish funds industry on occasion; hardly surprising as it provides austerity-hit Ireland with 12,000 jobs. In fact, Michael Noon, Irish finance minister, is to address the IFIA Annual Global Funds Conference in Dublin on June 12.
But does the politicians’ support go far enough? The mission of promoting Ireland to the world’s funds industry is a huge marketing and communications job. Should it be financially supported? At least some of the IFIA’s members think this is a fair point.
But Lardner says no.
“We have the cooperation and support of government, but it would be difficult in an era of austerity and purse-tightening to suggest to government that they might fund us.”
He adds that with the resources and cooperation across the industry that the IFIA can gain, “we can accomplish a lot”.
The IFIA can depend on IDA Ireland, a government agency that promotes investment in Ireland by foreign firms. The IDA helped stage an IFIA event in Tokyo last summer.
Also, in Hong Kong the IFIA has the support of the Irish Chamber of Commerce.
The IFIA is member-funded and its members are mainly custodian banks, administrators, legal and accounting firms. Fund manager members include Pioneer Investments, Legg Mason and Vanguard, while a number of others are associate members.
Lardner, though, would like to increase the involvement of – and therefore the financing from – fund managers.
“We will be trying to get more involvement from fund managers that use the jurisdiction.” This is a key strategic point for Lardner in the coming years, he says. “It’s what will mark us out.”
How will the IFIA do this?
Lardner says the IFIA already helps fund managers at an international level.
“Fund managers seem to be really reaching out for assistance from us. Firms from Switzerland, the Far East, the US have all sought our advice around AIFMD.”
Indeed, John Bruton, the former Taoiseach (prime minister), led an IFIA delegation to Geneva and Zurich in January for the body’s first industry seminars in the country.
Back at home, though, and as the AIFMD lands, there are still important issues to be finalised in Ireland. For one, how will depositary banks in Ireland work with prime brokers?
A prime broker can, in some circumstances, add to a depositary’s liability risk by being a de facto sub-custodian of assets. If the broker loses them, or goes bust, the depositary, not the broker, will be liable.
Some depositary banks in Luxembourg will work with a finite list of brokers belonging to only the strongest institutions. But Luxembourg has far fewer hedge funds than Ireland, making the issue for Ireland more complicated.
Should the IFIA dictate Ireland’s best practice? Lardner appears to think not. Rather, the IFIA’s role is to facilitate debate.
“We’ve tried to take the whole area and break it down… but it will ultimately be a discussion between depositaries and prime brokers.”
Whether this and other of the IFIA’s approaches to AIFMD under Lardner prove right, will be seen from July 22 onwards.
©2013 funds europe