Ireland
13 November 2013
Following a period of strong growth, AST takes a look at the factors driving the asset management success story in Ireland
Image: Shutterstock
An Irish funds industry delegation has announced that Ireland is now servicing a record number of assets.
Ireland now has €2.5 trillion in assets under administration, an all time high for the country. This represents a remarkable 43 percent of global hedge fund assets.
This is welcome news for a country that has experienced a protracted period of economic inertia. The financial crisis of 2008 set the Irish economy back by the best part of a decade.
Against this background, asset management is an Irish success story. The sector has grown every year but one since records began. The industry now hosts 915 fund managers from 50 countries, and employs more than 12,000 people throughout the country.
What has driven this phenomenal growth? The 12.5 percent corporation tax rate in the country goes some way to explaining its success as a fund domicile.
It is significantly lower than competing nations, and especially low when viewed alongside comparable economies. But the low rate of tax does not tell the whole story. In real terms, the headline tax figures in other states are not always as generous as they appear.
At a roundtable in London, which was hosted by the Irish Funds Industry Association (IFIA), Dierdre Power, tax partner at Deloitte, said: “Ireland’s corporate tax system is open, transparent and all the rules are clearly set out in our national law.”
“Our stable, low 12.5 percent corporate tax rate is one of the key planks or cornerstones of Ireland’s strategy for attracting foreign direct investment, including the funds industry. It is a key factor, but not the only one, in creating employment and generating economic activity.”
She added: “Other factors that make Ireland an attractive location for the funds industry include the fact that we have a well educated workforce, the expertise of dealing with a range of fund structures and strategies, the competitive cost base, the appropriate legal and regulatory framework, and our technological expertise.”
The corporation tax rate is undoubtedly low in Ireland, but Power believes that it is justified.
“The transparency of Ireland’s 12.5 percent tax rate means what you see is what you get. There are no ‘special deals’. You must have substance and activity here to claim the 12.5 percent rate. Ireland plays fair, but it plays to win and we are committed to continuing to compete fairly in order to attract new business.”
Figures from the Central Bank of Ireland show that in the year to date, the net asset value in UCITS funds increased by 4 percent.
Another factor driving success in the industry is the well-developed regulatory infrastructure in Ireland. The IFIA has made a significant contribution to legislators in the past year, on subjects ranging from money laundering to financial reporting.
With a raft of legislation and regulation on the horizon at the European level, firms are devoting a lot of their resources, particularly staff, to this area of their business. Is this happening at the expense of other areas of business practice?
Furio Pietribiasi, chairman of the Irish Association of Investment Managers, said: “The view of the association is that changes in legal and tax regulations in Europe and globally must be considered as a structural part of the business environment, because they are here to stay and nobody can stop them.”
“In such a context, all asset managers have to deal more or less with the same challenges, so the real competitive advantage that a location/domicile can offer is the access to those elements that are transformational and enable business growth, such as talent, innovation, knowledge/intellectual capital, and distribution intelligence. We believe that Ireland can offer all of that and for this reason, Ireland should be extremely attractive to asset managers that are operating from the US and want to tap in the European market.”
Perhaps most importantly of all, Citi-commissioned research suggests that Dublin has the highest quality of “human capital” in the world. This conclusion was reached using statistics ranging from the size of the working age population to the ease of hiring foreign nationals.
Ireland now has €2.5 trillion in assets under administration, an all time high for the country. This represents a remarkable 43 percent of global hedge fund assets.
This is welcome news for a country that has experienced a protracted period of economic inertia. The financial crisis of 2008 set the Irish economy back by the best part of a decade.
Against this background, asset management is an Irish success story. The sector has grown every year but one since records began. The industry now hosts 915 fund managers from 50 countries, and employs more than 12,000 people throughout the country.
What has driven this phenomenal growth? The 12.5 percent corporation tax rate in the country goes some way to explaining its success as a fund domicile.
It is significantly lower than competing nations, and especially low when viewed alongside comparable economies. But the low rate of tax does not tell the whole story. In real terms, the headline tax figures in other states are not always as generous as they appear.
At a roundtable in London, which was hosted by the Irish Funds Industry Association (IFIA), Dierdre Power, tax partner at Deloitte, said: “Ireland’s corporate tax system is open, transparent and all the rules are clearly set out in our national law.”
“Our stable, low 12.5 percent corporate tax rate is one of the key planks or cornerstones of Ireland’s strategy for attracting foreign direct investment, including the funds industry. It is a key factor, but not the only one, in creating employment and generating economic activity.”
She added: “Other factors that make Ireland an attractive location for the funds industry include the fact that we have a well educated workforce, the expertise of dealing with a range of fund structures and strategies, the competitive cost base, the appropriate legal and regulatory framework, and our technological expertise.”
The corporation tax rate is undoubtedly low in Ireland, but Power believes that it is justified.
“The transparency of Ireland’s 12.5 percent tax rate means what you see is what you get. There are no ‘special deals’. You must have substance and activity here to claim the 12.5 percent rate. Ireland plays fair, but it plays to win and we are committed to continuing to compete fairly in order to attract new business.”
Figures from the Central Bank of Ireland show that in the year to date, the net asset value in UCITS funds increased by 4 percent.
Another factor driving success in the industry is the well-developed regulatory infrastructure in Ireland. The IFIA has made a significant contribution to legislators in the past year, on subjects ranging from money laundering to financial reporting.
With a raft of legislation and regulation on the horizon at the European level, firms are devoting a lot of their resources, particularly staff, to this area of their business. Is this happening at the expense of other areas of business practice?
Furio Pietribiasi, chairman of the Irish Association of Investment Managers, said: “The view of the association is that changes in legal and tax regulations in Europe and globally must be considered as a structural part of the business environment, because they are here to stay and nobody can stop them.”
“In such a context, all asset managers have to deal more or less with the same challenges, so the real competitive advantage that a location/domicile can offer is the access to those elements that are transformational and enable business growth, such as talent, innovation, knowledge/intellectual capital, and distribution intelligence. We believe that Ireland can offer all of that and for this reason, Ireland should be extremely attractive to asset managers that are operating from the US and want to tap in the European market.”
Perhaps most importantly of all, Citi-commissioned research suggests that Dublin has the highest quality of “human capital” in the world. This conclusion was reached using statistics ranging from the size of the working age population to the ease of hiring foreign nationals.
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