There is no doubt that the funds industry is one of the biggest success stories in Ireland with assets under management in Dublin having more than doubled to over US$1.63tn in 2007 over the last th
There is no doubt that the funds industry is one of the biggest success stories in Ireland with assets under management in Dublin having more than doubled to over US$1.63tn in 2007 over the last three years. And while the sector is bullish about future growth opportunities, there are challenges and issues that need to be overcome in order to sustain the extraordinary growth we have already seen.
Deloitte carried out its annual survey of the fund administration community in Ireland in 2007, in order to obtain an understanding of the key business issues facing the industry. The survey acknowledged that the funds industry in Ireland had seen a ten-fold increase since the beginning of the millennium with hedge funds pegged as the fastest growing products. One of the notable aspects of the funds arena was the private equity fund and the high servicing growth behind it. This is consistent with a general trend in recent years towards the servicing of more complex, higher margin products, which is a positive development for the industry in Ireland as a whole as it signals a move ‘up the value chain’ of asset servicing.
Regionalisation and offshoring are high on the agenda for fund administrators. Nearly 15% of the industry is now located outside Dublin and over 40% of the respondents see this trend (regionalisation) continuing in 2008.
In terms of offshoring, Irish based administrators, which are continuing to attract more business particularly in products requiring high skill levels such as hedge funds and private equity, are looking to lower cost centres to provide additional capacity in routine and high volume activities. An overwhelming majority (72%) expect this trend to increase in 2008 and in subsequent years.
With a great geographical location, a pragmatic regulatory environment and a great business foundation, more and more clients are now interested in setting up shop in Ireland.
However, to sustain this growth, Ireland must surpass certain challenges that usually arise from high success. One major concern is the retention and recruitment of experienced staff. More than 80% of respondents stated this as a very significant issue. This goes on the back of another survey that indicated that fund industry attrition levels are running close to 30%. This is imposing a significant cost on the industry as well as impacting service levels.
Other issues include costs, managing growth and the need to make systems changes. More than 75% of respondents intend to make significant systems changes or upgrades over the next 12 months. In 2008, the industry expects significant improvements to kick in with the majority of respondents predicting that BPR initiatives will yield savings of between 6% and 15%.
Last but not least is the issue of risk management, which has taken on a whole new meaning since the start of the credit crunch last year. Fund administrators are showing an increased focus on risk management, and this was identified as the number one issue being focused on in due diligence checks.
To sum it up, the fund administration sector in Ireland still stands strong. By combating the above-mentioned issues and with a continuation of positive sentiment with regard to future prospects, Ireland is poised to sustain this growth.