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Funds and Asset Management Market Update Q1, 2020
Ireland is positioned as a dominant force as a European Funds domicile. The scale of successful development of the Investment Funds industry in Ireland is evidenced by the data on the trends in the number and value of funds under administration. As at the end of December 2018, there were 13,914 funds under administration in Ireland. The overall number of funds under administration has experienced a sustained upward trend since 2008, growing by 28.2 per cent over this period. The strengths of Ireland as a centre for establishing and servicing funds is also evidenced by the mix of funds: 7,290 (52.4%) of the funds under administration at the end of 2018 were Irish-domiciled, while 6,624 funds (47.6%) were non-domiciled.
There has been a number of emerging trends in Ireland’s Investment Funds industry over the course of the last few years. The regulatory burden on firms has increased substantially for the Funds industry and has ultimately led to the emergence of RegTech. This has created a substantial opportunity for Ireland, and as a result, many new, exciting RegTech start-ups have emerged in recent years.
Data Science has many potential uses, but one area where it has already made an impact is in Proprietary Investment Research. Large fund managers have hired significant teams of data scientists to analyse and seek out trends in a wide range of data sets. These are accelerating trends, as regional locations in Ireland are becoming increasingly attractive to both Irish and international Funds companies. This can be seen with Northern Trust’s growth in Limerick and State Street’s growth in Kilkenny. 2019 has seen significant growth in Kilkenny, while Opus Fund Services announced plans to open a regional office in Wexford.
With continued growth throughout last year, the assets under management of Irish funds have reached yet another record level and stand at €2.5 trillion as of last September. A recent trend has also seen investors continue to seek greater transparency and measures designed to protect their interests. Irish funds are very popular among such investors as they are heavily regulated by the Central Bank.
A key topic of conversation at this year’s Global Irish Funds Conference was the increasing number of socially aware funds. There has been a large increase in Environmental, Social and Governance (ESG) Mandate Investors. A common theme is the continued use of the outsourced model. We expect to see an increasing number of global managers either initiate or continue to increase their outsourcing activities.
There has also been a growing presence of Management Companies (ManCos). Third-party, or “rented”, ManCos are used by fund firms that need to establish a material presence in EU jurisdictions to meet regulatory governance requirements for traditional and alternative funds.
Whilst not a new topic, the trend of Mergers and Acquisitions has continued throughout 2019. Apex were the biggest movers earlier in the year with the acquisition of Link’s CPS, Throgmorton, Beacon Fund Services, Atlantic Fund Services and Broadscope. In Q4, we have seen Opus Fund Services acquire the fund administration unit of Advanced Fund Administration, and MUFG acquire select divisions of Maitland’s Hedge Fund Administration business.
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