irish fund industry updates · 2018-10-15 · irish fund industry updates. irishfunds.ie growth in...
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irishfunds.ie
Irish Fund Industry Updates
irishfunds.ie
Growth in AuM of the Irish Funds Industry
2008 to June 2018
517 597 759 820
968 1,044
1,275 1,447
1,579
1,831 1,877
129 151
205 235
260 301
388
452
506
565 610
-
500
1,000
1,500
2,000
2,500
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q2 2018
Net A
ssets
in E
UR
bill
ion
s
UCITS AIFs
Source: Efama, September 2018
irishfunds.ie
Fund Growth Trends: Number of UCITS and AIFS
2008 to June 2018
1,928 1,906 1,844 1,984 2,138 2,254 2,272 2,337 2,419 2,566 2,679
3,097 2,721 2,899
3,085 3,167
3,345 3,561
3,864 4,051
4,266 4,342
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q2 2018
Num
ber
of F
und
s
AIFs UCITS
Source: Efama and Irish Funds September 2018
irishfunds.ie
Ireland is the fastest growing of the 5 largest European
fund domiciles 2012 – 30 June 2018 (2011 based 100)
Source: EFAMA Statistics September 2018
2012 2013 2014 2015 2016 2017 Q2 2018
Europe 113 123 142 158 178 196 198
Luxembourg 114 125 148 167 177 198 202
Ireland 116 127 157 180 198 227 236
France 109 110 114 121 129 139 137
Germany 113 124 140 153 166 180 182
UK 117 135 159 179 177 199 200
-
50
100
150
200
250
300
% G
row
th
irishfunds.ie
Ireland Voted Favourite Fund Domicile
71%
45% 45%
33%
27%23%
20%
14%
8% 6% 6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Ireland Germany Luxembourg United Kingdom Netherlands France Sweden Spain Italy Malta Other
Which European domiciles would fund managers choose if starting over?
•71% of 200 global asset managers would choose Ireland as one of their top-3 European domiciles.
•73% of managers ranked Ireland as a top-3 jurisdiction in terms of its legal and tax framework for investment funds.
•72% of managers ranked Ireland as a top-3 domicile as regards business conditions for domiciling funds.
•67% of respondents ranked Ireland as a top-3 domicile as regards regulatory conditions.
•76% of US managers rank Ireland as a top-3 domicile in terms of the best regulatory conditions for domiciling funds in Europe.
•The full survey report is available from http://www.matheson.com/eiu-report
irishfunds.ie
The Story of 2018 in the Irish Funds Industry
• Ireland is the second largest fund domicile in Europe at the end of June 2018.
• The Irish funds industry has grown strongly in 2018 so far.
• Ireland services more than 40% of hedge funds globally
2,4872,457
Total assets under administration
Irish funds EUR billion
Non-Irish funds EUR billion
Sources: Central Bank of Ireland, Irish Funds September 2018
98 85
136115
139
298
81
0
50
100
150
200
250
300
350
2012 2013 2014 2015 2016 2017 YTD2018
Net sales €bn – Total Domiciled Funds
Net sales - Total Irish Funds
irishfunds.ie
Irish Domiciled Funds - by Asset Class
28%
22%25%
19%
4% 2%
Equity
Bond
Alternatives
Money Market
Balanced
Other
Source: Irish Funds July 2018
irishfunds.ie
Irish Funds - by Promoter Origin
61%
26%
8%
2%1% 2%
North America
UK
EU-27
Switzerland
Asia
Other
Source: Monterey 30 June 2017
irishfunds.ie
ETFs in the Irish funds industry
56%
10%
9%
23%
2%
Net Assets of UCITS ETFs by Domicile
Ireland
France
Germany
Luxembourg
Other
Source: Irish Funds, June 2018
irishfunds.ie
European ETF Market by domicile
2008 to June 2018
8 12 18 18 20 17 17 4 5 11 1118 24 27 31 35 43 43
47 53 56 532635
42 32 37 40 42 65 7082
47
21
3448 43
47 47 49
8182
110 168
24
43
62 68
96129 137
222
281
355
375
0
100
200
300
400
500
600
700
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Ireland
Luxembourg
France
Germany
Others
Source: Efama September 2018, PwC Analysis
irishfunds.ie
Evolution of cross-border distributionNumber of cross-border funds and registrations
irishfunds.ie
Top 5 markets for the registration of
Irish UCITS
Ireland
Registrations inDecember
2017
December
2016% Growth
United Kingdom 2,764 2,447 12.95%
Germany 2,643 2,141 23.45%
France 2,336 1,992 17.27%
Switzerland2,003 1,689 18.59%
Netherlands1,879 1,710 9.88%
Top 5 Markets 11,625 9,979 16.49%
Total No. of Registrations 26,928 23,161 16.26%
Source: PwC and Lipper, December 2017
irishfunds.ie
Typical Fund Structures
irishfunds.ie
UCITS or AIF
irishfunds.ie
UCITS & AIF Regulation
• Harmonisation of retail investment product
across the EU
• Regulated product - Central Bank of Ireland
• Automatically authorised for sale to members of
public in other EU Member States
• Must comply with marketing and advertising
regulations applicable to local UCITS funds
established in those other MS (EU “passport”)
• Primarily sold to retail investors but increasingly
targeting institutional investors
• ETFs and MMFs are UCITS regulated funds
• Alternative Investment Fund Managers Directive
imposes harmonised conditions and
requirements on the operations of AIF managers
in return for an AIF “passport” to market AIFs
across the EU and manage AIFs domiciled in
other member states other than the AIFM home
state.
AIF/UCITS
Investment Company (plc)
Unit Trust CCF ICAV ILP
Most popular
Denotes AIF only
irishfunds.ie
Typical Structure:
Investment Company (PLC / ICAV)
Investment Company PLCs:
• Can be either a UCITS or AIF PLC. Regulated entities set up as PLCs pursuant to Companies
Act 2014 (Ireland Company Law). PLCs are often umbrella funds with multiple sub-funds
which combine to give company totals.
• Each sub-fund has its own portfolio of investments and investors. There is segregated liability
between sub-funds.
Management Company (Optional – investment
company can “self-manage”)
Investment Company
(Ireland)
Owns assets of fund and appoints service providers
(may be self-managed)
Transfer Agent (Ireland)
Maintains shareholder
records
Investors
(any location)
Distributors
(any location)
sells fund to investors
Investment Manager
(any location)
makes investment decisions
Auditor
(Ireland) examines records for regulatory
compliance
Administrator
(Ireland) Calculates fund
NAV and prepares reports
Custodian
(Ireland) Safekeeping of
fund assets
Global
Sub-custodian
(any location) Safekeeping of assets in other jurisdictions
irishfunds.ie
ICAV – Key features
• The ICAV is an Irish regulated fund established under the ICAV Act 2015.
• It is a corporate vehicle and has separate legal personality.
• The Central Bank is both the registration and the supervisory authority of the ICAV.
• The ICAV is a flexible vehicle – it can be open-ended, closed-ended, have limited liquidity, be a
UCITS or an AIF.
• The ICAV can be established as an umbrella fund with various sub-funds and share classes.
• The ICAV has flexibility in terms of accounting standards (Irish, UK, USA, IFRS, Japanese and
Canadian GAAP) and sub-fund year ends.
• The ICAV is administratively less burdensome - there is just one constitutional document -
Instrument of incorporation (IOI) and the ICAV can dispense with requirement to hold an AGM.
• The ICAV can be self-managed or managed by external Management Company.
• The ICAV has the ability to “check-the-box” for US tax purposes.
• The ICAV is eligible to take advantage of some of the Irish treaty network, including the U.S.
treaty.
• The ICAV has the ability to have a special carry class at ICAV level.
irishfunds.ie
Comparison of ICAV and PLC
Distinguishing features ICAV PLC
Ability to ‘check-the box’ for US taxation purposes O
Required to have the aim of spreading investment risk O
Shareholder approval required for all changes to constitutional
documentO
May dispense with requirement to hold annual general meetings O
Accounts can be drawn up at sub-fund level O
Requirement to have minimum of 2 directors
Filing with Companies Registrations Office O
Ability to have Umbrella structure and/or Stand-alone structure
UCITS / AIF compliant structure
irishfunds.ie
Hot Topics
irishfunds.ie
Hot Topics
• Brexit
• Regulation
• Talent
• General Data Protection Regulation (“GDPR”)
irishfunds.ie
PwC Brexit survey
What is your preferred jurisdiction to relocate UK functions to post Brexit?
38.9%
33.3%
8.3%
5.6%
5.6%
2.8%
2.8% 2.8% Ireland
Luxembourg
Netherlands
Germany
Malta
Italy
Slovakia
Not relocating
36 responses
irishfunds.ie
Brexit Structuring Options
DEFINITIONS:
• ‘MiFID Firm’ : Investment firms authorised under Markets in Financial Instruments Directive.
• ‘Super ManCo’ : authorised to provide services to UCITS and AIFs w/ the option of add-on authorisations for
segregated mandates
• ‘SMIC’ : Self-Managed Investment Company
MiFID Firm
Super ManCo w/ Add-on Authorisations (‘v2’)
Super ManCow/ Delegates
(‘v1)
SMIC
Global
Asset
Managers
Regional
Asset
Managers
Management
Models (‘Delegation’)
Moderator:
Panellists:
irishfunds.ie
Panel Discussion: Trends in
Fund Structures & Regulation
Michelle Lloyd, Maples & Calder
Clive Bellows, Northern Trust
Andy Finch, Canaccord
Maria Gabriela Bianchini, Optionality Group
irishfunds.ie
Distributing Alternative Investment
Funds: European National Private
Placement Regimes
irishfunds.ie
1. ICAV Distribution Potential: Parallel
Funds
irishfunds.ie
2. ICAV Distribution Potential: Global
Master-Feeder
irishfunds.ie
3. Limited Investment in Cayman SPC –
84.9%
ICAV
Cayman SPC
Assets
84.9%
100%
irishfunds.ie
4. Co-Investment Option
ICAV
Cayman SPC
Assets100%
84%
16%
irishfunds.ie
Armin Choksey, PwC
Comparisons of ICAV & Singapore VCC
irishfunds.ie
The Singapore Variable Capital StructureVCCs can be set up as a
stand-alone entity,or as an umbrella entity with
multiple sub-funds.
A legal entity form specificallyfor investment funds that can
be used for traditional and alternative strategies, both on an open-ended and closed-ended basis.
VCCs require a
Singapore based
licensed or
regulated fund manager,unless exemptedunder the regulations.
The capital of a VCC will
always be equal to itsnet assets, thereby providingflexibility in the distributionand reduction of capital.
Foreign corporate fund
structures can be inward re-domiciled to Singapore as a VCC.
VCCs could avail itself of theUS
“check-the-box” election.
Courtesy of PwC Asian
Investment Fund Centre
irishfunds.ie
Overall regulatory frameworkSingapore Variable Capital Company (VCC)
Courtesy of PwC Asian
Investment Fund Centre
irishfunds.ie
Comparing Fund Forms (1/5)
VCC legislationLegal framework
The Irish Collective Asset-management Vehicles Act
2015 (the “ICAV Act”)
NoAre directors independent to fund manager?
Not required by the law. Irish Funds voluntary corporate governance code requires a
minimum of 1 independent director
Shares, debenturesTypes of securities that can be issued Shares, debentures
1Number of required directors 2
Yes (minimum one)Fund Manager directors required? No
1 Director must be resident 2 Directors must be residentDirectors must be resident?
MAS/ACRARegulatory authority Central Bank of Ireland
Common lawJudicial system Common law
Comparison by PwC Asian Investment Fund Centre
IrelandSingapore
Restricted/ Exempt VCC ICAV set up as QIAIF
The comparative are performed on high –level and is not meant to be a legal or regulatory advice. Legal advise is recommended.
irishfunds.ie
Comparing Fund Forms (2/5)
IrelandSingapore
Restricted/ Exempt VCC ICAV set up as QIAIF
Yes- mall offerings/private placement (less than
50)/institutional investorsCan be exempt from regulation? No
Singapore onlyLocation of fund managerMust be based in EU, or
approved in equivalent non-EU countries.
N/AMinimum capital requirement
Minimum subscription is EUR 100,000. Self managed
funds minimum capital of EUR 300,000
NoInvestment risk spreading No
YesIs the fund regulated? Yes
N/ARegister of directors required? Yes
Comparison by PwC Asian Investment Fund Centre
The comparative are performed on high –level and is not meant to be a legal or regulatory advice. Legal advise is recommended.
irishfunds.ie
Comparing Fund Forms (3/5)
IrelandSingapore
Restricted/ Exempt VCC ICAV set up as QIAIF
NoCan FS be prepared at sub-fund level? Yes
SFRS, IFRS, US GAAPFinancial Statements GAAPIFRS, US GAAP, Irish
GAAP, Japanese GAAP and Canadian GAAP
NoAre Financial Statements publicly available? No
NoAre Shareholder lists publicly available? No
YesCheck-the-box election? Yes
YesRe-domiciliation allowed? Yes
NoCan be distributed to EU via AIFMD passport? Yes
YesCan be distributed to EU via private placement? Yes
84# of tax treaties in the jurisdiction 74
Comparison by PwC Asian Investment Fund Centre
The comparative are performed on high –level and is not meant to be a legal or regulatory advice. Legal advise is recommended.
irishfunds.ie
Comparing Fund Forms (4/5)
IrelandSingapore
Restricted/ Exempt VCC ICAV set up as QIAIF
YesCan the fund access the tax treaties? Depends on the country
YesListing ability? Yes
NoFund taxation Exempt
NoSubscription tax No
YesMaster-feeder available? Yes
??Timeline to market QIAIF – 24 hours
YesCross sub-funds investments Yes
As per NAVShare price As per constitutive document
Comparison by PwC Asian Investment Fund Centre
The comparative are performed on high –level and is not meant to be a legal or regulatory advice. Legal advise is recommended.
irishfunds.ie
Comparing Fund Forms (5/5)
IrelandSingapore
Restricted/ Exempt VCC ICAV set up as QIAIF
Not requiredAre shareholder meetings required? Can be dispensed
As per constitutive document
Distribution
As per constitutive document and subject to
minimum capital requirement
Fair valuedValuation principlesFair valued unless provided for differently in constitutive
document.
??VAT/GST?Exempt but can register for
VAT and make reclaims
YesAre local service providers required for Company Secretary?No - but registered office in
Ireland
YesAre local service providers required for Auditor? Yes
Yes - Potentially through tax incentives
Are local service providers required for Administrator? Yes
Yes - (PE/RE exempt)Are local service providers required for Custodian? Yes
Comparison by PwC Asian Investment Fund Centre
The comparative are performed on high –level and is not meant to be a legal or regulatory advice. Legal advise is recommended. Slides should be accompanied with narrative to enable comprehensive interpretation.
irishfunds.ie
Gerard Whitty, IDA
Brexit, Irish Economic and FDI
Update
Q3 Economic
Performance
&
Recent FDI
Investment
Announcements
Gerard Whitty, Director, ASEAN & Taiwan
IDA Ireland, Singapore Office
Ireland Economic
Performance & Forecasts
40
Irish economy the top performer in Europe
Fastest growing economy in the Eurozone for past 4 years
GDP +7.2% in 2017
Growth across all sectors in 2017
National and International forecasts expect strong growth to continue in 2018 and 2019
GDP up 2.7% in Q1 2018 year-on-year
Source: CSO Quarterly National Accounts, July 2018
41
GDP Forecasts (%) 2018 2019
European Commission 5.6 4.0
Department of Finance 5.6 4.0
Central Bank of Ireland 4.7 4.2
IMF 4.5 4.0
ESRI 4.7 3.9
OECD 4.0 2.9
1.3%
1.7%
2.1%
2.3%
2.4%
5.1%
7.6%
11.2%
15.2%
16.0%
0.0% 5.0% 10.0% 15.0% 20.0%
Real estate activities
Distribution, transport, hotels…
Public admin, education and…
Arts, entertainment and other…
Financial and insurance activities
Agriculture, forestry and fishing
Industry
Professional, admin and…
Construction
ICT
Broad based sectoral growth in 2017*
*Growth in Gross Value Added at constant basic prices 2016-17
7.2
3.0 2.9 2.4 2.3 2.2 2.2 1.7 1.7 1.5
0.01.02.03.04.05.06.07.08.0
GDP Growth 2017Constant Market Prices
Source: IMF, World Economic Outlook July 2018
Openness key to Ireland’s economic success
42
4%
6%
8%
8%
12%
25%
26%
Food
Medical Devices*
Financial Services & Insurance
Machinery & TransportEquipment
Business Services
Computer Services
Pharma & Chemicals
Composition of Total Exports 2016
*Miscellaneous manufactured articlesSource: CSO; IDA calculations
197.9
238.7260.3
2014 2015 2016
Total Exports (€bn)
Services Goods Total
IDA Client Exports (% of total)
67% 66% 66%2014 2015 2016
€66.4bn
€64.6bn
€30.3bn
€21.1bn
€21.4bn
€14.6bn
€10.1bn
Behind headline figures: Inflation and Competitiveness
43
Source: Eurostat, CSO, July 2018Chart shows HICP measure of inflation
+ Ireland consistently ranked amongst the top countries in the world to do business
+ Growing economy has not led to significant price increases: Inflation consistently below Euro area average, and supported by weak sterling since Brexit vote
+ Maintaining and improving competitiveness as the economy grows is a key government priority.
0.7%
2%
-1
0
1
2
3
2015M01 2016M01 2017M01 2018M01
Inflation (% change)
Ireland Euro Area
88
12
6
109
17
24
Forbes BestCountry in the
World to doBusiness 2018
GlobalEntrepreneurship
Index 2018
IMD WorldCompetitivenessYearbook 2018
EIU DemocracyIndex 2017
ReputationInstitute Country
Index 2017
EuropeanInnovationScoreboard
World BankDoing Business
2018
WEF GlobalCompetitiveness
Report 2017
Ireland's International Ranking
Ireland: “A” grade from all major credit rating agencies
Ratings Agency Long-Term Short- Term Outlook/TrendDate of Last
Change
Standards & Poor's A+ A-1 Stable Jun-15
Fitch Ratings A+ F1 Stable Dec-17
Moody's A2 P-1 Stable Sep-17
DBRS A (high) R-1 (middle) Stable Mar-16
R&I A a-1 Stable Jan-17
High levels of investor confidence in Irish Economy
Sovereign debt ratings upgraded
Irish bond yields are trading below 1% and in line with core European sovereign yields
44
Labour Market
45
Over 2.2 million people at work in Ireland
46
+ Strong employment growth: 2.23million people now at work in Ireland
+ Employment at its highest level since 2008
+ Broad based employment growth across all sectors, not just FDI
+ For every 10 jobs lost in recession, 9 have been replaced
+ IDA clients created 1 in every 4 additional jobs in Ireland since 2012
+ Unemployment rate 5.1% in July 2018 –lowest level since October 2007
+ Long term unemployment rate low at 2.1%
+ Ireland’s unemployment rate below EU (7%) and Eurozone (8.4%) average
Source: CSO, Department of Finance, Eurostat
3
8
12
16
18
23
23
24
25
27
36
43
48
53
0 20 40 60
Financial, insurance and…
Agriculture, forestry and…
Transportation and storage
Public administration and…
Other activities
Administrative and…
Information and…
Wholesale and retail trade
Human health and social…
Education
Professional, scientific…
Industry
Accommodation and…
Construction
Broad based Employment Growth across all Sectors (000s) Q1 2012 – Q1 2018
Total Employment Growth: 359,000
Irish labour costs mid range in Europe
+ Irish hourly labour costs are mid range in Europe; below the Eurozone average but slightly above the EU average.
+ Irish labour costs are 10th in the EU, below countries like the Germany, Belgium, Luxembourg, France and the Netherlands.
+ Wage growth remains subdued (2% annually)
Source: Eurostat 2017. Labour costs shown for business economy sectors
47
26.6
29.830.4
0.0 10.0 20.0 30.0 40.0 50.0
BulgariaRomaniaLithuania
LatviaHungary
PolandCroatia
Czech RepublicSlovakiaEstonia
MaltaPortugal
GreeceCyprus
SloveniaSpain
United KingdomEU 28
ItalyIreland
EurozoneFinland
NetherlandsAustria
GermanyFrance
LuxembourgSwedenBelgium
Denmark
Labour Costs (€ per hour)
Knowledge and Talent
Education system ranked in the top 10 in the world.98% participation rate in education amongst 18 year olds – Highest in Europe. 53% aged 30-34 have successfully completed third level studies (EU average 39%).Irish IT specialists best educated in EU; 82% have third level qualification (EU average 62%).Ireland has the fastest-growing tech worker population in Europe for 2017, with the expectation that impacts of the Brexit vote will see that figure grow further.*New International Baccalaureate School being established in Dublin.
The IMD Competitiveness Yearbook 2018 ranks Ireland globally as:1st for secondary school enrolment1st for flexibility and adaptability 3rd for high worker motivation5th for availability of skilled labour5th for attracting and retaining talent7th for financial skills8th for foreign highly skilled personnel
*Source: State of European Tech 2017
48
Foreign Direct Investment
Update
49
Investments in Ireland up 22% in first half of 2018
Key Announcements 2018
52
Why Ireland in a post-Brexit scenario?
Brexit further underlines the advantages of Ireland as a destination for FDI, which include:
53
EU Market Access
English language
Common law system
Track record in FDI attraction and existing base of FDI investors
Highly skilled multilingual workforce
Political and economic stability
Consistent public policy regarding FDI
Regulatory certainty
Representation in EU policy and regulatory fora
EU Trade Agreements
Proximity to and connections with the UK and London
Impact of FDI on Irish Economy
54
MNCs make significant contribution to Irish Economy
IDA clients
Account for 10.2% of total employment in Ireland
58% of employment is outside of Dublin
Spent €17.9bn in Irish Economy in 2016 on payroll and Irish sourced materials and services
Invest €5bn in capex annually, half outside of Dublin
Invest €1.6bn in-house R&D
Account for 66% of national exports and 80%* of Irish corporation tax receipts.
55*Source: Revenue, April 2018; figure for all MNCs
55
National Development Plan (2018-2027)
Budgetary framework for €116 billion investment in public infrastructure and capital works over a 10 year period.
10 strategic investment priorities including education, housing, roads, public transport and the environment.
Government Plan to increase carrying capacity of the economy
56
National Planning Framework
Core strategy to develop strong regions around key urban centres of scale.
Comprises 75 National Policy Objectives including urban and regional population targets.
International Tax Environment
57
12.5% Corporate Tax Budget 2018 reaffirmed that the 12.5 per cent tax rate is, and will remain, a core part of our offering.
U.S Tax ReformU.S. Business will always need to have operations in the EU, even after completion of the Tax Cuts and Jobs Act 2017. Our 12.5% tax rate will continue to be competitive in all likely outcomes and will offer certainty to international business.
Digital EconomyDigital taxation is a global issue that should be progressed on an international basis through the OECD, not through Europe.
CCCTBUnder the EU Treaties, for the European Council to move a policy area such as taxation from unanimity to qualified majority voting would require a unanimous decision. Ireland would not support this.
OECD BEPSIreland has committed to adopt OECD minimum standard measures to counteract Base Erosion and Profit Shifting as well as those set out under EU ATADs. The OECD has given Ireland its highest possible overall rating on transparency and exchange of information.
Apple State Aid Ireland profoundly disagrees with the European Commission assessment and has lodged an appeal with the European courts.
IDA Ireland, Your Partner On Your Investment Journey
58
Introductions to Peer CompaniesAccess to Government SystemIntroductions to Industry AssociationsCollaboration With 3rd Level Institutions
Design and Hosting of tailored Fact-Finding Site VisitsInformation Gathering, Analysis and EvaluationRFIs (Requests for Information)
IDA Funding Programmes & IncentivesPublic Relations & Media SupportEmployment Permits & VisasProperty Solutions
Awareness(Consideration)
Engagement(Short-listing)
Investor Evaluation(Comparing)
Decision(Validating) Implementation After-Care
Gerard WHITTY
DIRECTOR, ASEAN & TAIWAN
IDA IRELAND, SINGAPORE OFFICE
+65 6238 0774 / +65 9815 4521
To learn more log on to WWW.IDAIRELAND.COM
IDA IRELAND – DUBLIN HQ
+353 1 603 4000