Ireland's financial sector looks to the future
Last year Deloitte & Touche was commissioned by Ireland's Industrial Development Agency to examine future opportunities for the country's international financial services sector. While the industry has been enormously successful since Dublin's International Financial Services Centre was created 15 years ago, the IDA believed the sector needed fresh momentum.
Some of the success factors still exist, such as the favourable tax environment and the ready availability of a skilled workforce. However, the price of success is that Dublin is no longer a low-cost centre, and there is increasing competition from other jurisdictions.
The report, published last December, identified five main areas that offer the greatest promise for growth in the future. Two opportunities are linked to investment management or funds, in particular Dublin's fast-growing hedge funds sector: to try to create scale in asset management, and to build on the existing centre of excellence for fund servicing.
One of the IFSC's original objectives was to create promote asset management activity, but so far this has been largely limited to Pioneer, the two domestic banks, Bank of Ireland and AIB, and a handful of hedge fund boutiques. It has proved extremely difficult to attract investment managers away from established centres such as London. This demonstrates the importance of a community in which asset management specialists can meet their peers and move jobs very easily.
However, hedge funds seem a good area on which to focus, because it's a much less institutional environment. A cohesive marketing approach could attract further alternative investment management activity, creating a 'cluster effect' and in the long term attracting the bigger players.
Dublin has had enormous success in getting itself on the map as a major European centre for fund servicing. However, it's important not to become complacent or inflexible in any way. For example, the industry wants to avoid any excessive delays in obtaining regulatory approval for fund start-ups or changes.
This should not be at any cost to Ireland's reputation as a well-regulated centre within the EU. But subject to that need for strong and effective regulation, there is room to develop the rules to make Dublin as attractive to funds as possible.
For example, to benefit from the favourable tax environment, it's important to have as broad as possible coverage of international tax treaties, so that funds administered here can be genuinely tax transparent from the investors' point of view.
Another proposal is to encourage the development of Ireland as a centre for product innovation in areas including fund servicing, perhaps through tax-based incentives. This is possible because compared with 15 years ago, Dublin now has a critical mass of very experienced people who really know the business at a senior level.
This is an important opportunity because of the growth expected in the European asset management industry over the next decade, the increasing importance of long-term private retirement savings, and the ongoing trend toward outsourcing of investment servicing by asset managers.
For Hedgeweek's full report on Dublin Hedge Fund Services, please click here
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