BNP Paribas Asset Management plans to change its exchange-traded funds strategy by domiciling ETF products in Ireland for the first time. The bank currently has all of its ETF business domiciled in France and Luxembourg and is now seeking regulatory approval to set up ETFs in Ireland. The move by BNP Paribas, which comes on the back of a similar strategy switch by asset manager Amundi in mid-2022, highlights the attractiveness of Ireland’s funds regime and the advantages of Ireland’s double taxation treaty network.

BNP Paribas Asset Management has a range of over 100 ETFs all of which are domiciled in France and Luxembourg with the decision to add Irish-domiciled ETFs to its range taken to allow it to compete with other ETF issuers in Europe. The asset manager cited investor preference for Irish ETFs in the UK, Switzerland and the Nordic markets. In addition, the asset manager’s global head of ETF and index sales, Lorraine Sereyjol-Garros, speaking with ETF Stream, said another reason behind the move was that Irish-domiciled ETFs with exposures to US and global equities can have a lower tax burden than other domiciles.

Typically, US equity ETFs domiciled in Ireland can have a 15% withholding tax rate on dividends while in Luxembourg and other European jurisdictions this rate is ordinarily 30%. The reduced rate of withholding tax applies to Irish ETFs that can avail of Treaty relief under the Ireland-US Tax Treaty.

Fellow French asset manager Amundi began basing ETFs in Ireland in May 2022, prior to this its ETF range was domiciled across Luxembourg, France and Germany. The asset manager said at the time that the rationale behind the move was that several of their clients, especially institutional investors, favoured Ireland for ETFs with exposure to global and US equities.

Amundi’s Irish ETF range has seen assets under management grow to in excess of €1.5 billion across 24 products.
Looking at the broader industry, the latest figures for Irish domiciled funds show that at the end of November 2022 numbers reached 5,332 funds and sub funds while net asset value of Irish funds sat at €2.9 trillion, down five per cent on an annual basis. Irish domiciled fund NAVs peaked in December 2021 at over €3 trillion but the turmoil in global markets in 2022, brought about by Russia’s February 2022 invasion of Ukraine and the changed interest rate environment, has hit share prices with a knock-on effect on fund NAVs.