Ireland has been subject to immense financial change over the past decade and a key area of ongoing growth has been the asset servicing community.As the global fund management industry has changed since 2008, with funds merging or closing, the relentless growth of regulation and the increasing emphasis on technology-based solutions, the Irish asset servicing community has had to adapt to these challenges. In conjunction with this, there has been significant deleveraging and risk reduction by investment managers, with less access to leverage, reducing their market exposure.
Administrators have had to respond to this changing environment, develop more bespoke solutions for clients and provide more than just a fund accounting and shareholder service. The rapid increase of onshore Irish regulated funds such as Ucits and the Qualifying Investor Alternative Investment Fund, or QIAIF, requires administrators to adjust their accounting and net asset value model to more frequent valuation periods, in many cases daily, and provide intra-day access to data.
The most significant change is the structure of the Irish fund administration industry seeing as a number of global banks have moved away from direct ownership of fund administration companies, such as Butterfield, Citibank, Credit Suisse, UBS and Wells Fargo, and others. There have also been a number of banks acquiring administrators to enter the market for the first time with, for example, Sumitomo Mitsui Trust Bank (SMTB), Japan’s largest trust bank and Asia’s largest asset manager acquiring the global asset services division from Daiwa Securities in 2012.
Consolidation in Ireland looks set to continue and there are forecasts that the number of administrators will further decrease from the 42 providers today over the next few years.
Another major change in the Irish funds industry has been the introduction of the depositary, as enshrined in both the Alternative Investment Fund Managers Directive (AIFMD) and the Ucits rules.
Many of the Irish depositaries have the necessary systems and procedures in place but a significant change under Ucits V is the requirement for the depositary to have full liability for the loss of assets in custody with no contractual discharge to the sub-custodian or investment manager, as permitted under AIFMD. The outcome is that depositaries require a very strong balance sheet and risk management framework to manage this additional risk.
Luxembourg is one of Ireland’s primary competitors in Europe. Both domiciles dominate the fund administration business, supporting managers from all over the globe. This competition provides for a healthy environment and requires the regulators in both jurisdictions to support the industry with an efficient authorisation process for new fund structures.
Naturally they both undertake this in different ways. However, Ireland has actively marketed itself as a global centre with great success and in particular its relationship with the North American investment community and the UK. The introduction of the Irish Collective Asset-management Vehicle, or Icav, in March 2015 has been very successful and it has now become the vehicle of choice for new fund launches. In fact, annual data released by the Central Bank of Ireland for 2016 shows that assets under administration for both onshore and offshore funds have reached a record level of €4.1 trillion.
Ireland therefore looks set for ongoing growth and recognition as an innovative, forward-looking centre for global investment managers to domicile
their investment funds and be supported by a well-established, proven and forward-thinking asset servicing community and regulator.
Charles Bathurst, consultant, Sumi Trust Global Asset Services
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