What sets transfer agency services in Ireland apart from other regions?
Ireland’s geographic location combined with a competitive tax regime, transparent regulatory system and highly educated and cosmopolitan talent pool have all contributed to the country becoming the major centre for the servicing and distribution of investment funds.
Over the past 25 years Ireland, and Dublin in particular, has developed a sophisticated and scalable transfer agency environment with the ability to service a wide range of fund types and products to a global audience. The industry operates within an open regulatory environment, coupled with favourable tax regimes, both of which are key drivers for Ireland being rated as one of the best countries in the world in which to do business.
Ireland offers a dynamic and innovative business culture enabling fund promoters to quickly bring new and exciting products to market and for these to be administered efficiently within one of the most developed transfer agency infrastructures in Europe.
For me, the quality of people and availability of skilled labour is one of the biggest differentiators over other fund centres. At International Financial Data Services (IFDS), we benefit from a fantastic mixture of highly educated individuals from diverse backgrounds, creating a truly international feel within our organisation. Such an approach means we are more knowledgeable of, and sensitive to, different cultures and I believe this translates positively into the high service levels we provide to our clients.
Another key advantage is the business and labour costs in Ireland, which make it a highly appealing location for international fund groups to locate to, particularly those from the US. This is complemented by the fact that a large proportion of local residents, 500,000, are fluent in a foreign language, and almost one-fifth of the population originates from international roots. About 30 languages are supported, making Ireland an ideal base from which to service global markets.
What kinds of products are popular in the Irish market? How much interest is from overseas?
With a number of global expert service providers such as IFDS and State Street, Dublin has positioned itself as a leading fund centre capable of supporting a wide range of institutional and retail products, from traditional to alternative, passive to active, liquid to illiquid.
Ireland is viewed as a centre of excellence for UCITS products with almost 80 percent of locally domiciled funds falling within this framework, allowing overseas fund promoters a competitive entry point to tap into the 500 million consumers within the European marketplace and to benefit from distribution into more than 70 countries internationally.
As a leading specialist in the administration of exchange-traded funds (ETFs)—with 50 percent of the European market share—and in money market funds, Ireland is currently the fastest growing domicile in Europe for the cross-border distribution of UCITS products. Fund administrators help more than 450 fund promoters to distribute their Dublin-domiciled ranges into all corners of the globe.
In addition, Ireland is a world leader in its ability to service the alternative investment fund industry and was the first regulated jurisdiction to provide a specific regulatory framework for this type of product. This approach has resulted in Ireland becoming the largest administration centre in the world for hedge funds, servicing over 40 percent of assets globally, according to the Irish Funds Association.
How important is technology in reducing operational risk in transfer agency?
A recent State Street survey showed that 81 percent of asset managers have increased their investment in technology (and in technology providers or transfer agents) by more than 5 percent over the past three years. This highlights the significant role technology plays in complying with regulatory changes, reducing operational risk and creating innovative solutions for investors.
Industry-wide investment in technology infrastructure and standardisation has resulted in Dublin achieving the highest automation levels for transaction processing in Europe (83 percent), reducing administration errors and resulting in an increase in fund processing efficiencies and productivity—something Ireland is ranked best in the world for.
Following the implementation of multiple tax and regulatory-led changes such as the Foreign Account Tax Compliance Act (FATCA) over the past couple of years, transfer agents like IFDS have needed to balance operational efficiency with the ability to introduce additional checks within the functionality of our technology platforms. We have addressed this within our organisation by introducing a dedicated operational control unit focused on removing manual process and controls.
With fund promoters domiciling in Ireland to take advantage of the growing distribution ecosystem and global reach, technology becomes a key enabler to ensuring applicable due diligence and know-your-customer checks are performed on new investors, in line with national and regional anti-money laundering and counter terrorist financing legislation.
Ireland benefits from being a centre of excellence for innovation, research and financial technology. These insights and developments play a major part in helping the industry to deploy new technologies that help fund organisations manage and reduce risk.
What else should asset managers and owners be doing to further improve their back-office processes?
To achieve the operational functionality required to support the cross-border distribution of investment funds, transfer agents need to be fully integrated with distribution engines worldwide, having capabilities that manage the servicing requirements of multi-lingual, multi-currency and multi-time zone processes.
Increased standardisation will continue to improve operational efficiencies, lowering administration costs in the process, and that will ease some cost pressures faced by asset managers. In addition, investment in to the harmonisation of data across funds, investors and jurisdictions has the ability to gain greater insights in to investor behaviour, and has the potential to transform the future distribution landscape through the introduction of predictive analytics.
Lastly, asset managers should be placing greater emphasis on innovation to improve the customer experience. With the industry becoming ever more transparent and, in some cases, dis-intermediated following the introduction of commission bans in EU states, it will become more important for asset managers to rebuild relationships with their investors and to be able to clearly articulate where their services add real value. Having already established an administrative relationship with investors, asset managers can benefit from the services and connectivity of transfer agents to support them during this transitional phase.
What kind of developments would you anticipate in the Irish transfer agency market in the next six to 12 months?
In February 2014, the Organisation for Economic Co-operation and Development approved the Common Reporting Standard (CRS), referred to as ‘global FATCA’ in the industry. Ireland has elected to be an early adopter of the standard, meaning that from 1 January 2016 Ireland-based transfer agencies will collect data on tax residency for qualifying new investors.
For some, investor categories data is collected for reporting to the Irish Revenue Commissioner (IRC) regardless of whether investors’ countries of residence have signed up to CRS. Reporting to the IRC will commence in June 2017.
Further developments include the publication of Investor Money Regulations (IMR) for fund service providers on 30 March 2015 by the Central Bank of Ireland, with an effective date of 1 April 2016. The IMR sets out key changes which impact how transfer agencies collect and hold investor money and will impact some promoter distribution models.
The Client Assets Regulations (CAR), which was also published by the Central Bank of Ireland, comes into force in October for investment firms. The Irish funds industry is working with the central bank to identify how adherence to the spirit of IMR may be achieved under the CAR regime.
We anticipate the continuing effects of regulation and requirements for continual investment may see further contraction in the number of providers within the industry. As a provider purely focused on record keeping and transfer agency, we remain focused on growth within this market.
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