In recent years, the Irish fund market has struggled under a burden of regulation that would break a lesser jurisdiction. From regulatory reporting to UCITS V, and from CP86 to CP140, the need for regulatory compliance across the board has resulted in increasing interest in and take-up off third-party management company (ManCo) offerings.
In recent years, the Irish fund market has struggled under a burden of regulation that would break a lesser jurisdiction. From regulatory reporting to UCITS V, and from CP86 to CP140, the need for regulatory compliance across the board has resulted in increasing interest in and take-up off third-party management company (ManCo) offerings.
Until 2017, most people setting up UCITS funds in Ireland used the self-managed fund (SMIC) model. However, there was a whole stream of continuing regulation – UCITS IV, UCITS V, AIFMD, EMIR, FATCA, CRS, the introduction of Central Bank online reporting systems, a huge increase in in regulatory reporting, PRIIPs, KIIDs, EMT/EPT, MiFID II – with none of the traditional delegates in the SMIC structure responsible for managing that regulation.
According to Patrick Robinson, Managing Director at MJ Hudson Bridge in Ireland: “This really started to lead to the growth in third party management companies in Ireland.”
While some firms set up third party management companies early on, MJ Hudson Bridge came later to the market with its ManCo, launching its first funds in 2017 when people were then starting to look at what management companies could offer in terms of a more effective operating model or an outsourced operating model.
Robinson explains: “Shortly after CP86 started, the Brexit referendum came along and the number of asset managers looking to set up their own management companies in Ireland to provide a post-Brexit EU distribution solution gave regulators an opportunity to push increased local substance expectations very quickly. The push for increased local substance has continued post-Brexit, resulting in the traditional self-managed funds appointing third party management companies.”
Of course, there is still an appetite for internal ManCos for those who want an EU licence, whether for EU distribution or individual account management, and scale still matters, with most of the top tier managers who required an EU contingency now having set up with their own regulated firms somewhere within the EU.
However, many managers are still waiting for final clarity on post-Brexit UK access to the EU and decisions on financial services equivalence before making long-term decisions on setting up their own EU licences..
“They’re looking at all the workaround solutions in the interim, including MiFID hosting licences including in jurisdictions such as Malta and Cyprus, at how robust those are from a regulatory standpoint and from their investors’ viewpoint, and waiting until UK financial services access is clear before making decisions about setting up their own licence within the EU,” Robinson says.
Robinson believes that, when the current regulatory change in Ireland settles somewhat, service will become the key differentiator between third-party ManCo offerings, with areas such as ESG a particular area for expansion.
“We’re looking at assisting our managers with the real implementation of ESG into their investment processes, investment due diligence and how investment managers are assessing the underlying companies they are investing in for ESG. Our specialist ESG consultancy business at MJ Hudson has been providing ESG services to asset managers for over 15 years and has been a huge benefit to a number of our clients in developing real ESG into their investment strategies and policies,” he says.
“The next stages of growth and opportunity in management companies will be about breadth of service and that one-stop shop outsource model,” Robinson concludes.
Patrick Robinson
Managing Director (Ireland), AIFM and ManCo
Services at MJ Hudson Bridge
Patrick Robinson has over 20 years experience in the asset management and funds services industry. Patrick began working for MJ Hudson Bridge in October 2009.
Patrick has an in-depth knowledge of UCITS and AIFM requirements and has project managed a number of UCITS Management Company /AIFM authorisations in Ireland and has provided assistance on numerous fund structuring /product development projects. He has established the risk, compliance and operational infrastructures of a number of asset management firms.
