Ireland has always been more “Boston than Berlin”, says Barry O’Brien at FundRock. And the Irish funds industry is not only a Dublin phenomenon.
Against the backdrop of a tumultuous start to the year for the global economy, Ireland continues to see the benefits of its broad and unique operating environment, enabled by highly reputable service providers that support global asset managers with their continued growth. The 2022 Monterey Insight Ireland Fund Report found that Irish-domiciled funds reached $3.7 trillion in 2022, with the number of Irish funds and sub-funds growing by 7.4% to 6,443.
So, what can Ireland’s asset management industry look forward to in 2023? And what unique challenges does Ireland face when it comes to building upon its reputation as an increasingly important financial services hub?
Evolving Éire
Over 20 years of innovative initiatives have propelled Ireland to become a leader in the global financial services landscape, employing over 17,000 people. Through its mature, robust and flexible regulatory framework, Ireland continues to support the successful development of the European asset management industry. As a result of this, Ireland has become a popular employment destination – both for those looking to return home as well as international experts seeking a new challenge and bringing with them an influx of new skills and specialisms, particularly when it comes to alternative assets.
Credit is due to the government for creating an attractive business environment in Ireland. One recent innovation has been the introduction of Irish Investment Limited Partnership Funds (ILPs). These flexible fund structures have wide market appeal, and 2023 will be a test to see if Ireland can make the most of this regulatory change and the opportunities it brings.
“We expect that the next phase of Ireland’s evolution as a financial centre will be the growth of front-office capabilities such as management company and fund distribution solutions.”
We expect that the next phase of Ireland’s evolution as a financial centre will be the growth of front-office capabilities such as management company and fund distribution solutions. We have seen significant growth in the number of non-EU-based managers and the boards of Irish self-managed funds seeking partners with significant substance and technology to support cross-border fund distribution and navigate increasingly complex regulatory requirements.
The talent challenge
The biggest challenge for asset managers looking to succeed in Ireland is around recruiting and retaining talent. With unemployment expected to remain at lows of just 5%, it is a jobseekers’ market – creating a ‘war for talent’ amongst the growing asset management and wider financial services industry.
Faced with this, many businesses in the financial services sector see outsourcing as an attractive solution to talent shortages. Hiring the right people is a time-consuming exercise, and working with a third party makes it easier for funds to quickly scale up or down their operations. In contrast, in-house hiring can be challenging when funds experience fluctuations between busy and fallow periods where workload exceeds or drops below capacity.
“We expect that the next phase of Ireland’s evolution as a financial centre will be the growth of front-office capabilities such as management company and fund distribution solutions.”
To reduce the workload and administrative burden on valued employees, it is becoming essential for Irish funds to outsource tasks, both at the most specialist and most routine ends of the spectrum, to third-party providers.
This is not a challenge unique to Ireland; talent markets are even tighter across Europe, especially in Luxembourg, which has historically attracted private funds. As a result, managers are seeking new gateways to access European markets and are finding that Ireland offers a compelling alternative and natural fit for US and UK managers distributing into Europe. Ireland has always been more “Boston than Berlin”.
Beyond Dublin
The pandemic and the lockdowns used to contain it have led to a shift in working patterns, with employees looking to cut commute times and work closer to home. Regionalisation is now an even bigger trend than it was previously, with companies growing headcount in multiple new locations throughout the country.
In our industry, it has become apparent that only operating from one office in Dublin is not a sustainable strategy for success in Ireland. Instead, we are seeing a growing number of offices opening closer to key talent centres – supported by IDA Ireland – such as Cork, Limerick and Kilkenny.
Outlook
In the fund management sector in particular, 2023 will see a strong focus on costs and delivering efficiencies. Working with a single service partner that can provide a range of solutions will become ever-more appealing to cost-focused fund managers, rather than dealing with a range of providers, each of which may be trying to negotiate upwards on fees.
“With unemployment expected to remain at lows of just 5%, it is a jobseekers’ market – creating a ‘war for talent’ amongst the growing asset management and wider financial services industry.”
So, as we look forward to the remainder of 2023 and beyond, the picture for Ireland is cautiously optimistic, given the wider context it finds itself in. The questions Irish managers need to be asking themselves centre on riding out the current economic turbulence and ensuring that, as the Irish economy continues to grow, demand can be met and supported over the long term.
*Barry O’Brien is head of funds – Ireland, at FundRock, part of Apex Group.
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