Ireland is now one of Europe’s major financial centres, with approximately 300 companies in the IDA Ireland financial services portfolio employing over 40,000 people across investment management, banking, insurance, payments and fintech. IDA has won a number of significant investments in IFS since 2020 with a broad range of activities and a wide regional spread including, Waystone and Fiserv in Tipperary, Unum in Carlow, Transact, AxiomSL and Legato in Limerick, Alter Domus in Cork, Fidelity in Galway, IQ-EQ in Clare, Stripe and Mastercard in Dublin, Ardonagh Group in Mullingar and State Street in Kilkenny. IDA markets Ireland as a global centre of excellence for financial services across its international networks in the US, Europe and Asia and the industry is well positioned for further growth, a goal which aligns with the vision contained in the Ireland for Finance Strategy 2025.
Bernadette Nulty
High-Skilled Employment Supported by the Funds Industry
Investment management is one of the largest sub-sectors in IFS in Ireland, employing highly skilled specialists across financial, legal, tax, audit and technology activities. The ecosystem provides a range of services to enable the establishment, sale, management, administration, support and oversight of Irish-domiciled and non-domiciled funds. Ireland is the largest centre for fund servicing in Europe, with 1,047 fund managers from 54 countries, and 15,600 funds administered, representing a total value of over €6.5tn in Assets Under Administration (AUA) in December 2021. There are over 40 fund administrators and 20 depositaries in Ireland, which has established itself as a leading location for UCITS and AIFs, with expertise in alternative hedge funds having over 40% of global hedge fund assets serviced from the jurisdiction.
The Irish operations of leading global fund managers are creating substance and employment in Ireland in response to CP86 regulatory guidance from the Central Bank of Ireland. Increasingly these firms are hiring C-suite executives responsible in Ireland, on the back of positive and resilient operating experiences here, especially evident during the COVID-19.
Front and Middle office asset management activities are increasingly expanding here resulting in Ireland being a leading domicile for internationally distributed investment funds across multilateral trading facilities, portfolio management and oversight, investment advisory and oversight, investment analysis and risk and compliance. The numbers are remarkable. Ireland had €4.1tn in domiciled Assets Under Management (AUM) in December 2021, equating to 6% of investment fund assets worldwide and almost 19% in the EU, making it the third largest funds domicile in the world, the fastest growing and second largest centre in Europe. Irish AUM are set to exceed €5 trillion by 2025.
17 of the top 20 global asset managers have Irish domiciled funds covering a broad range of fund types, including Exchange Traded Funds (ETFs) representing more than 67% of the total European ETF market, according to the latest figures from Irish Funds.
Following the UK’s decision to leave the EU, Ireland became a jurisdiction of choice for many investment managers who established here to retain access to the EU market. Ireland’s robust regulatory system, transparent tax regime, quality of available talent combined with international recognition of Irish fund structures, resulted in an increase in specialist asset managers, including a cluster of alternative credit managers and asset managers focussed on sustainable investment. In the past five years, assets managed from Ireland have grown by 58% driven by the expanding presence of leading international firms such as Amundi, BlackRock, Vanguard, State Street and Mediolanum.
The Irish operations of leading global fund managers are creating substance and employment in Ireland in response to CP86 regulatory guidance from the Central Bank of Ireland. Increasingly these firms are hiring C-suite executives responsible in Ireland, on the back of positive and resilient operating experiences here, especially evident during the COVID-19 pandemic. These roles include full time Designated Person roles and International Heads of Compliance Marketing and Distribution, Risk and Audit.
The global asset management sector is experiencing disruptive trends in digitalisation, data analytics and ESG demands against a backdrop of shifting regulatory priorities and talent shortages. The Irish client base is responding to these challenges in order to sustain its global position and continue to scale.
Transformation – Digitalisation, Data Analytics and Automation
COVID-19 enhanced the need for digitalisation in the funds industry, leading to increased demands for digitised manual processes, optimised client engagement and process efficiencies, provision of insights and advanced technology to protect against cybercrime. The intergenerational transfer of wealth and changes in workforces is driving digital innovation as a new generation of investor and employee enters the market. Fidelity Investment’s Irish operation is adopting disruptive technologies such as natural language processing (NLP) to transform customer interactions, by digitally detecting, understanding and reacting to natural language. It has built an in-house virtual assistant and chatbot infrastructure to support text based natural language question answering services. State Street’s new technology and cyber security operation in Kilkenny is creating high quality jobs and highlighting Ireland’s potential for financial services companies to diversify, scale and manage global operations.
Ireland is the largest centre for fund servicing in Europe, with 1,047 fund managers from 54 countries, and 15,600 funds administered, representing a total value of over €6.5tn in Assets Under Administration (AUA) in December 2021.
The optimisation of existing Big Data banks in funds through analytics, is a significant commercial opportunity for Ireland, by extracting useful financial indicators and making informed predictions. IDA Ireland is actively supporting clients in building capability in digitalisation and data analytics, through an online innovation diagnostics scorecard, bespoke funding, technical advice, and linkages to Ireland’s research ecosystem for partnering opportunities to co-develop world class products and services. Relevant SFI research centres include the Insight Research Centre for Data Analytics, which offers access into the data analytics and AI ecosystems in Ireland and Europe and CeADAR, Ireland’s Centre for Applied AI, which collaborates on AI, machine learning and data analytics solutions. Companies such as Deutsche Bank, Fidelity Investments, Mastercard and BNY Mellon are collaborating with these academic institutions to both tap into their talent pipelines and to gain access to know-how on emerging technologies such as AI, Blockchain, Cloud, Cyber, Data Science and Quantum Computing.
Upskilling large fund administration operations in Ireland to safeguard jobs is a key focus of IDA Ireland. This is driven by regulatory, cost and margin pressures and increasingly fund managers are looking to fund administrators as partners in technology development and insights. IDA is supporting company-wide programmes in skill needs assessments, core capability transformation, automation enablement and strategic platform investment, through collaborations with stakeholders including Skillnet and academia.
These initiatives are future proofing Irish operations and positioning them within the global corporate network as “best in class”. In partnership with IDA, Northern Trust has implemented a strategic programme focussed on talent development and upskilling to meet the demands of the changing workplace. Northern Trust’s team in Limerick has continued to grow, securing new mandates and is now home to Global Learning and Development functions for the group.
ESG
ESG trends are reshaping the asset management ecosystem, with a new generation of investors fuelling demand for responsible investment and making investment decisions based on social factors. Some analysts are projecting that global ESG assets could exceed $53tn by 2025. KBI Global Investors, Conquest and Amundi are leading in the area of responsible investing strategies in Ireland. Priorities are expected to shift beyond financial performance to delivering on ESG goals, which will become mainstream. Embedding ESG across organisations with a clear framework for measurement and reporting is critical, in addition to being consistent with public communications. Regulatory reporting and metrics are a key challenge and there is an urgent need for a unified standard. Many asset managers are turning to technology to help address this challenge.
Aisling O'Carroll
Companies typically go to ratings agencies for ESG credentials, but increasingly they are building in house AI-based solutions in order to reassure investors around the validity of ESG metrics using alternative data as a source of ‘ESG truth’. This helps to address issues such as data coverage and graduality gaps as techniques such as Natural Language Processing provide a scalable way to assess the ESG credentials of an investment based on publicly available data.
A growing number of asset managers in Ireland have a primary focus on sustainable investment, e.g. Gresham House and Temporis Capital. The existing cluster of renewable energy infrastructure fund managers in Ireland have €7 billion in AUM. Multinational companies across all industry sectors have pledged net zero Greenhouse Gas (GHG) emissions goals across their supply chains. This is increasingly seen as a source of competitive advantage, as well as a sustainability issue. IDA is supporting its client base with the preparation of Climate Action Plans, funding for consultants to support the reduction of emissions and/or invest in building renewable capability, e.g. solar panels, biomass, biogas or wind turbines, a potential opportunity for the investment community.
IDA is also supporting the development of the new international Sustainable Finance Centre of Excellence in Ireland and the implementation of the Sustainable Finance Roadmap, particularly on the development of talent, to ensure the relevant knowledge and capability required to meet future workforce needs is in place.
Digital Assets
The digital asset ecosystem is represented broadly across the IFS sector in investment management, fund servicing, fintech and cryptocurrency sectors. International banks are expanding their services by leveraging blockchain technology and digital assets to enable digital transactions. State Street, Fidelity, JP Morgan, BNY Mellon, Citi and Deutsche Bank provide services to the digital assets industry. As the technology becomes more mainstream, Ireland will play an important role in this emerging and rapidly growing sector. Zodia Custody, the institutional cryptoasset servicing company owned by Standard Chartered Bank recently established its EU crypto custodian business in Ireland and secured CBI registration as a Virtual Asset Service Provider (VASP).
Alternatives
Demand for alternative assets such as Private Equity/Capital and Real Estate is continuing to grow globally. Securing private market capabilities requires the right talent and a robust integration strategy to embed alternatives to traditional structures to achieve results. In addition, Private Equity fund administration and financial reporting is niche, requiring specialised skill sets. Irish alternative funds span hedge funds, private equity, private debt, infrastructure, real estate as well as a significant number of aircraft leasing and shipping funds. AUM in alternative assets in Irish regulated funds increased from €151bn in 2009 to over €770bn at present.
Optimisation of existing Big Data banks in funds through analytics, is a significant commercial opportunity for Ireland, by extracting useful financial indicators and making informed predictions. IDA Ireland is actively supporting clients in building capability in digitalisation and data analytics, through an online innovation diagnostics scorecard.
More than 4,000 professionals are specialised in the area of alternatives in Ireland. There is a growing cluster of Alternative Credit managers such as Blackstone Capital, KKR, Bain Credit, Guggenheim and Hermes Investment Management and the Global Real Assets and Infrastructure operations of BlackRock, the world’s largest asset manager, are headquartered here.
The ILP (Investment Limited Partnership) (Amendment) Act 2020, updated in 2021, is an important development with the potential to help the Irish funds industry capitalise on the future global growth in private markets, attract capital and compete internationally. In parallel, “Specialised Depositary Licences” or “Real Asset Depositaries” complement the ILP as both are central to the enhancement of Ireland as a domicile for alternative fund managers, in private equity and real estate funds and other funds investing in illiquid or less liquid assets.
Sanne, was the first successful applicant to secure a specialised depositary licence from the CBI, and other global payers such as Alter Domus have successfully followed suit. Eagle Alpha, an Irish company, is a leading provider of alternative data for the investment management sector including ESG data. Ireland has the potential to leverage the opportunity in private assets further, to mirror the existing established expertise in hedge funds.
Talent Challenges
Talent management is top of the agenda for the growing asset management industry, which must respond with a new wave of talent to meet demands in digital, data, ESG and front office activities, while retaining the existing workforce. As companies look to attract, retain and grow in a hybrid environment the global “war on talent” is evident. Companies are implementing talent centric strategies and upskilling initiatives to build resilience and differentiate themselves. Competition for employees has intensified and hybrid or remote working is the benefit most in demand. The increase in remote and hybrid working is increasing access to a broader national talent pool, with many IDA investment management clients benefiting from regional hubs including Alter Domus (Cork), Fidelity (Galway), IQ-EQ (Clare), State Street (Kilkenny), BNY Mellon (Wexford and Cork), HedgeServ (Cork) and Fintru (Letterkenny).
Increasingly, companies are taking a global approach for executive search and Ireland, as an English-speaking member of the European Union (EU), continues to be an attractive location for young EU nationals looking to gain valuable experience with global financial firms, without the requirement for an employment permit. IDA Ireland can support clients’ applications for critical skills, general and intracompany transfer permits for non-EEA personnel.
Summary
Ireland is very well positioned to leverage the global growth in the funds management and servicing industry. By embracing technology and operational innovation, the industry has the potential to move from resilience to reinvention. The sector has experienced sustained growth and the opportunity for digital transformation in large institutional firms and the emergence of niche alternative providers positions Ireland favourably as a strategic location for future investment. A focus on innovation across business models including talent management, automation and operational mandates will be key for the continued success of the industry in Ireland.