1 irishfunds.ie

Tokyo

Seminar

2018

30 October 2018

irishfunds.ie

Main Sponsor:

irishfunds.ie

Sponsors:

irishfunds.ie

H.E. Paul Kavanagh

Ambassador-Designate of Ireland to Japan

Ambassador’s Address

irishfunds.ie

Mr. Toshihiro Iwasaki

The Investment Trusts Association

Opening Remarks

irishfunds.ie

Mr. Pat Lardner, Irish Funds

Keynote Speech: An update on the Irish Funds Industry,

implications of Brexit and opportunities

for the industry

irishfunds.ie

Who/what we are….

• industry association for all aspects of regulated cross border funds

in Ireland

– representative function

– promotional function

• 135 member firms, located both in and outside Ireland

• key link to the authorities & policy makers in Ireland and beyond

• the industry’s representative in Europe and globally

• a platform for collaboration, information sharing and driving

outcomes & improvement

irishfunds.ie

The Irish funds industry: a snapshot

irishfunds.ie

A Global Funds Centre…

Source: Monterey Ireland Report 2017

irishfunds.ie

For Global Distribution

Source: Lipper IM

irishfunds.ie

Total Assets Under Administration –

Split between Irish & Non Irish Funds

838 965

1,394 1,398 1,443

1,883 1,886

2,199

2,722

3,375

3,806

4,095

4,408

4,945

584 728 807 646 748 964 1,055

1,227 1,344 1,664

1,899 2,085

2,396 2,487

254 237

587 752 695 919

831

972

1,378

1,711 1,907

2,011 2,012

2,457

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 June-18

EU

R

Billi

on

Total Domiciled and Non-Domiciled

Assets Under Administration

Total Non Domiciled Total Domiciled

Source: All data sourced from Central Bank of Ireland

irishfunds.ie

Irish Domiciled Assets

• UCITS represent 75% of Irish

Domiciled Assets

• 88 UCITS Management Companies

• 164 AIFMs Registered or Authorised

• 695 AIFMs operating in Ireland on

cross border basis

• 467 ICAVs established (since 18 March

2015)

All data sourced from Central Bank of Ireland

irishfunds.ie

Growth of Largest European Fund Domiciles

Source: EFAMA Statistics

0%

20%

40%

60%

80%

100%

120%

140%

2011 2012 2013 2014 2015 2016 2017

% G

row

th

2011 2012 2013 2014 2015 2016 2017

Europe 0% 13% 23% 42% 58% 78% 97%

Luxembourg 0% 14% 25% 48% 67% 77% 98%

Ireland 0% 16% 27% 57% 80% 98% 126%

France 0% 9% 10% 14% 21% 29% 37%

Germany 0% 13% 24% 40% 53% 66% 80%

UK 0% 17% 35% 59% 79% 77% 99%

Europe Luxembourg Ireland France Germany UK

irishfunds.ie

Irish Domiciled Funds – Net Sales

• Net sales for 2017 were more than double the total for 2016

• Net sales into Irish domiciled funds accounts for 30% of the

European total

85,465

135,668 114,706

139,416

298,052

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2013 2014 2015 2016 2017

EU

R M

n

Net Sales (€M) by calendar year - Total Domiciled Funds

Net Sales - Total Domiciled Funds

Source: All data sourced from Central Bank of Ireland

irishfunds.ie

UK Referendum & “Brexit”

• The UK will leave the European Union (EU) on 29 March 2019

• Things which are not known (at the time of writing)

• Whether there will be a Withdrawal Agreement and transition period (if there is a transition period it will run from 30 March 2019 to end December 2020)

• What the future trading arrangements between the UK and the EU will be

• Things which are certain/clear:

• Ireland remains a committed member of the EU

• Irish domiciled funds’ access to the EU single market unchanged

• The UK is providing a Temporary Permissions Regime (TPR) which will allow existing Irish funds to continue being sold to UK investors for a period of 3 years

• The most important issues for Irish Funds are:

• Ensuring UK managers can still manage Irish domiciled funds

• Ensuring Irish domiciled funds can still be easily sold to UK investors

• Ensuring Ireland has the best offering for new AIFM / Management Company and MiFID structures

• Irish Funds is engaging with relevant authorities and helping members and managers

providing solutions

irishfunds.ie

Brexit - three interdependent themes

Distribution

Management

Models

(‘Delegation’)

Growth

OVER 2,700 IRISH

FUNDS SOLD TO UK

INVESTORS

$636bn

IN IRISH FUND ASSETS

MANAGED BY 175+ UK

FIRMS IN IRELAND

Continuity in UK investor

access to Irish funds

Continuity in

UK firm

management

of Irish funds

Increase Ireland’s growth

trajectory as an

international asset

management centre

SOURCE: Lipper IM Dec 2017

Monterey Ireland Fund Report 2017

Current context Target outcome

irishfunds.ie

Other developments……….

• Updating of Ireland’s Investment Limited Partnership Legislation

• On the parliamentary schedule as a piece of priority legislation for the current

term.

• Will provide additional scope for private equity and real asset funds.

• Reform of the European Supervisory Authorities (ESAs)

• Industry engaging intensively to ensure delegation of portfolio management

continues in current form and under scrutiny of national regulators without

additional oversight / approval from ESMA

• Exchange Traded Funds (ETF)

• CBI in September published their response to ETF Discussion Paper with

various policy changes flagged

• EU Cross Border Distribution

• Industry continues to input on this engagement to increase efficiency of EU

cross border distribution

irishfunds.ie

Other developments……….

• Pan European Personal Pension Plan (PEPP)

• Industry white paper published on PEPP and prepared case studies which assisted progression through ECON committee. Now progressing through trilogue with more favourable pay-out provisions.

• AML

• Industry have engaged in consultation on the new 4th AML Directive which has been published and is due to be enacted before the end of 2018 and will engage with the CBI regarding new AML Guidance Notes

• Tax Transparency

• OECD has awarded Ireland the highest international rating on tax transparency and exchange of information.

• Industry in discussion with authorities on implementation of Mandatory Disclosure Regime

• Money Market Fund Regulation (MMFR)

• Industry has been very actively engaging on the issue of reverse distribution mechanisms ahead of the new MMFR coming into effect in Jan 2019

irishfunds.ie

Conclusion

EU Member & Strategically Positioned

+

International Hub for Globally Distributed Investment Funds

+

Unrivalled Experience and Expertise & the Widest Range of Fund Structures

irishfunds.ie

Brian Dillon, Partner, Dillon Eustace

Legal and Regulatory Update

irishfunds.ie

Fund Management Companies

(FMC”)

Guidance

CP86

irishfunds.ie

Requirements applicable to FMCs by virtue of their authorisation as a:

UCITS Management Company

UCITS Self Managed Investment Company

AIFM

Internally Managed AIF.

From consultation process beginning in 2014 to effective

implementation in July 2018.

irishfunds.ie

The 4 new core rules relate to:

streamlining of managerial functions to 6 managerial functions

the organisational effectiveness role

the retrievability of records’ rule

the ‘location’ rule

NB. The CBI guidance on (i) delegate oversight and (ii) directors time

commitments is already in force.

New Rules in existence since 1 July 2018

irishfunds.ie

Aims and objectives of finalised guidance

AIM Enhance effectiveness of FMC and their boards of

directors leading to improving investor protection

FOCUS Ensuring substantive control by FMC over

delegates;

irishfunds.ie

Streamlining of managerial functions to 6 functions :–

Fund Risk Management,

Operational Risk Management,

Investment Management,

Regulatory Compliance,

Distribution,

Capital and Financial Management.

Guidance sets out the expectations of the CBI as regards role and

time of Designated Persons (“DP”). [Time commitment].

Managerial Functions: Post 1 July 2018

irishfunds.ie

Purpose Someone is constantly monitoring how well

FMC is organized and resourced

Organisational Effectiveness: Post 1 July 2018

• Must be discharged by an independent director

• Relevant Director can only discharge Operation Effectiveness Role

• Operation Effectiveness policy - frequency of reporting, support

from DP

• Responsible for raising any organisational issues with the Board to

improve effectiveness e.g.

(i) Are there adequate internal resources being allocated?

(ii) What conflicts of interests are arising?

(iii) Review of composition of the Board and effectiveness

evaluations?

(iv) How is supervision of delegates working?

irishfunds.ie

Effective Supervision: Location Rule & Records

The Central Bank has introduced (i) a “location rule” and (ii) a

“retrievibility of records” rule as a means of increasing its effective

supervision of FMC.

Concept of “Supervisability”:

“the capacity to carry out the CBI’s engagement model without undue restraint

and the ability to react in a crisis”

irishfunds.ie

Effective Supervision:

The ‘Location Rule’: July 2018

Rationale for the Location Rule:

Ability of the CBI to influence FMC on an ongoing and day to day

basis;

The more aware the FMC is of the presence of the CBI, the more

concerned it is likely to be of the consequences of falling below the

expected standards of the CBI;

The CBI believes that a FMC which has at least 50% of its directors

within the EEA and 50% of its management functions being

discharged by DP within the EEA will be more cognisant of the

“ongoing supervisory presence and impact of the Central Bank”.

irishfunds.ie

Effective Supervision:

Retrievability of Records: July 2018

Effective supervision of the FMC will depend on whether or not the FMC can produce records upon request by the CBI

Records must be immediately retrievable in or from the State:

If requested by CBI before 1pm, must be provided to CBI on same day;

If requested by CBI after 1pm, must be provided to CBI before 12pm on next business day.

FMC need to consider how they are going to store their records.

Need to ensure that records are immediately retrievable?

If relying on third parties to store records, need to revisit contractual arrangements.

irishfunds.ie

Effective Supervision:

Retrievability of Records: July 2018

Record Management Policy:

must be reviewed by board of FMC annually; and

must be audited (either by internal audit function or externally)

on a yearly basis.

Emphasis on document management and record retention

including:

Delegated service provider contracts

Board minutes

Policies and Procedures

Letters of Engagement

irishfunds.ie

Effective Supervision: Dedicated Email Address

Each FMC must now have a dedicated email address to facilitate

effective communication by and to the CBI.

Expectation that the email address will be monitored daily.

CBI communication with the FMC will increasingly be channelled

through the e-mail address e.g. recent connected party questionnaire.

irishfunds.ie

General principles to bear in mind....

Contravention of any of the 4 new rules will constitute a “prescribed

contravention” of the relevant legislation and may lead to the CBI

invoking the administrative sanctions regime.

Compliance by the FMC with the rules and guidance must be

demonstrable through appropriate record-keeping and minutes.

Proper documentation of policies and procedures is critical.

Policies should reflect actual practice.

Any issues and FMC can expect communication from CBI.

irishfunds.ie

Central Bank publishes findings from thematic review of UCITS

performance fees

Following a recent thematic review of payment of performance fees by

UCITS, the Central Bank recently has sent a letter (the “Letter”) to all

UCITS management companies requiring them to conduct a review of

their existing performance fee methodology calculations to ensure that

any performance fees charged comply with its UCITS Performance

Fee Guidance (the “Guidance”).

It also requires them to provide written confirmation to the Central

Bank that such review has taken place by 30 November 2018. In

responding to the Central Bank.

Review of Performance Fees

irishfunds.ie

Central Bank publishes findings from thematic review of UCITS

performance fees

UCITS management companies must identify any issues of non-

compliance with the Guidance or other issues identified in the Letter

and must identify steps being taken by the UCITS management

company to “rectify the situation, including any material impact on

UCITS and their investors”.

irishfunds.ie

Review of methodologies used to calculate performance fees

Identification of any improper payment of performance fees

Performance Fee Approval Process

irishfunds.ie

CAYMAN LEGAL UPDATE

irishfunds.ie

All new Cayman funds required to make these appointments from June 1,

2018.

Regulated funds (CIMA registered) and Unregulated funds (non-CIMA

registered) are in scope.

Regulated Cayman funds – must have appointed the officers by 30th

September 2018 but are allowed until 31st December to notify CIMA via the

REEFS online system.

Unregulated Cayman funds – are allowed up to 31st December to appoint

the officers, they have no filing requirement with CIMA.

Most administrators are offering these services, clients preferring a ‘one-

stop shop’ approach.

Private Equity/Venture Capital structures are facing some issues with

duplication of roles, CIMA are to issue additional guidance.

Appointment of Compliance Officer (AMLCO),

Money Laundering Reporting Officer (MLRO) and

Deputy MLRO

irishfunds.ie

Mirrors the approach taken by GDPR

Will require service agreements, fund documents to be updated

Will still be applicable for those clients who are out of scope for

GDPR

Many service providers are adopting a global approach to data

protection by implementing GDPR.

Data Protection Law – expected to be brought into

force in Q1 2019

irishfunds.ie

Peter Callaghan, SuMi TRUST (Ireland)

Presentation: Fund Administration –

Fintech & Cyber Trends

irishfunds.ie

• Global trend in Financial Technology (FinTech) continues and

financial services is a particular area of focus.

• Drivers of move to FinTech include:

- capacity to cater for evolving client/ investor reporting

requirements (enhanced analysis and transparency)

- drive towards real-time reporting

- automation of routine processing

- increasing regulatory reporting with shortening timeframes

- distribution platforms increasingly require secure and robust

connectivity

• Investment in FinTech increasingly seen as defensive mechanism as

opposed to creating an outright competitive advantage.

Fund Administration – FinTech Trends

irishfunds.ie

• The larger Fund Service Providers invest in FinTech directly but a

significant number of niche FinTech providers have gestated in the

industry focussing on core FinTech aspects.

• These niche providers are focusing on:

- Dynamic matching/ reconciliation systems.

- Regulatory reporting solutions

- Data Capture and Processing

- Dynamic Risk / Performance Attribution engines

Fund Administration – FinTech Trends

irishfunds.ie

• The focus for Fund Services Providers include:

- RPA – trade processing/ support/ enrichment (investment trades

and shareholder capital transactions)

- Enhanced reconciliation solutions – not just fundamental

reconciliations (cash & custody) but at a more micro level of data

source to data source

- Enhanced validation processes (away from binary checks but also

into investigation of differences)

- Shareholder account opening – trend towards self service then

with validation

- Applied investor AML due diligence and enhanced sanctions

screening

- Enhanced data capture and processing (efficiency)

- Supporting more dynamic risk reporting and performance

attribution engines

Fund Administration – FinTech Trends

irishfunds.ie

Blockchain – Irish Funds Initiative

• Blockchain is a secure online ledger which allow entities to exchange

data with third parties in a secure manner and without

intermediaries.

• Irish Funds along with a FinTech consultancy practice and some

large administrators selected fund regulatory reporting as a pilot

project to explore Blockchain utillisation as an industry solution.

• The pilot project has been completed and next steps to be

determined but it was an excellent example of Irish Funds and

Service Providers showing enlightened self-interest and

collaboration by taking an lead in exploring FinTech as a solution to

problem areas.

Fund Administration – FinTech Trends

irishfunds.ie

• Developments in technology can bring many enhancements in

output, productivity and client satisfaction. Advances in technology

are also changing the inherent risk profile of fraud from a cyber

perspective.

• The perceived risk of cyber fraud is increasing as evidenced

continually by industry surveys.

• The increased risks from external attack require an increased level

of vigilance – a firm can have the best firewalls but a hithertofore

trusted counterparty (supplier, investor, asset manager) can be

hacked (for instance) and seek to procure monies or assets by

impersonation.

Fund Administration – Cyber Trends

irishfunds.ie

Regulatory Approach

• The Central Bank of Ireland undertook a thematic review in the

sector sometime back and issued guidance to the chairperson of

each regulated fund & service provider as to what they perceived to

be the best practice in relation to managing cyber risk.

• They stress very clearly that the board needs to oversee this risk

and ensure it is properly governed and managed.

• These best practice cyber requirements are used by the Central

Bank in their ongoing monitoring and inspection of regulated

entities.

Fund Administration – Cyber Trends

irishfunds.ie

Irish Fund Approach

• IF, via its working groups, has met with the CBI regularly to discuss

approach to cyber risk on a partnership basis.

• There is a cyber group actively working on cyber to promote

awareness. There are three strands on this:

- interfacing with other sectors (banking, insurance) to help

promote best practice across the sectors.

- arranging industry events where relevant policing authorities,

service providers and advisors share their intelligence/

experiences.

- Periodic cyber bulletins

Fund Administration – Cyber Trends

irishfunds.ie

Looking Ahead

TIBER-EU

• In May the European Central Bank ìssued the Framework for Threat

Intelligence-based Ethical Red Teaming (TIBER-EU).

• The purpose of TIBER is to enable EU Regulators to work with

financial institutions to put in place a programme to test and

improve their resilience against sophisticated cyber attacks.

• Each jurisdiction will issue their own TIBER requirements.

• In areas of cyber and risk the Central Bank of Ireland is increasingly

applying policy on a cross sectoral basis.

Fund Administration – Cyber Trends

irishfunds.ie

Looking Ahead

FFIEC-CAT

• The Federal Financial Institutions Examination Council (FFIEC) is a

US based body to prescribe uniform principles and standards for

the federal regulation of financial institutions.

• They recognised the increasing threat of cyber and so developed

the Cyber Assessment Tool (CAT) to assist firms in identifying their

cyber risks and assessing their preparedness to deal with cyber-

security issues.

• Whilst US based, some see this assessment tool as the benchmark

for assessing and measuring a firms cyber- maturity profile.

Fund Administration – Cyber Trends

irishfunds.ie

Conclusion

1. FinTech & Cyber are strategic items for every firm. Many

initiatives bring great potential in terms of increased servicing

capacity/ efficiency levels – but they can also radically change the

risk profile for a company of business disruption, fraud and data

leakage (GDPR).

2. Globally the Regulators are very much aware of cyber threats

(indeed some have encountered cyber events themselves) so

they are very clearly setting out their requirements – and as cyber

threats evolve – so must industry resilience and awareness.

3. In Ireland – cyber threats are fully understood and there are a

number of initiatives within IF and its members to collaborate to

help ensure awareness, preparedness and to shape best practice

across the industry.

Fund Administration – FinTech & Cyber Trends

irishfunds.ie

Mr. Declan Murphy, PwC (Ireland)

Mr. Kenji Nakamura, PwC (Japan)

European Market Trends & Tax

Considerations to Invest in

Europe

irishfunds.ie

The European Investment Fund Industry

Net Assets of AIFs: EUR 5,965 billion

Increase of 1.2% in H1, 2018

(EUR 5,893 billion at the end of 2017).

Net Assets of UCITS: EUR 9,823

billion

Increase of 1% in H1, 2018

(EUR 9,730 billion at the end of

2017)

Net assets of UCITS and AIFs: EUR 15,788 billion at the

end of June 2018

(EUR 15,623 billion at the end of 2017).

Net sales of UCITS and AIFs:

EUR 250 billion for the first half (H1) of 2018

(2017 full year Net Sales were EUR 949

billion)

irishfunds.ie

Size of the European Funds Industry

2008 – June 2018

Source: EFAMA September 2018

4,528 5,267

5,990 5,639 6,302 6,862 7,175

8,168 8,658 9,731 9,823

1,646

1,863

2,189 2,322

2,656 2,942

4,070

4,412

5,483

5,893 5,965

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q2,2018

EU

R B

illi

on

NET assets in €billions

UCITS AIFs

irishfunds.ie

38%

19%

27%

12%

0% 4%

UCITS

Equity Multi-Asset Bond

Money Market Guaranteed Other

ETFs 7%

of UCITS

AUM

Breakdown of the European Funds Industry Assets

June 2018

13%

24%

16% 1% 1%

11%

34%

AIFS

Equity Multi-Asset Bond

Money Market Guaranteed Real Estate

Other

Source: EFAMA September 2018

irishfunds.ie

In the first half of 2018:

• UCITS Equity funds registered inflows of EUR 95 billion.

• Multi-Asset UCITS funds registered inflows of EUR 82 billion.

• UCITS Bond funds registered net inflows of EUR 25 billion.

• UCITS money market funds registered net outflows of EUR 20 billion.

• Other UCITS registered inflows of EUR 4 billion.

• Included in the above, UCITS ETFs registered net inflows of EUR 3.4 billion.

The European Investment Fund Industry:

Net Sales of UCITS

Net sales of UCITS:

EUR 186 billion during first half of 2018

Source: Efama September 2018

irishfunds.ie

• Buoyant cross‐border UCITS fund

business dominated by two countries: the

market share of Ireland and Luxembourg

in the European UCITS assets was at

55.2% at the end of June, 2018.

• Total net assets of UCITS in these two

countries are EUR 5.4 trillion.

The European Investment Fund Industry

55%

45%

Market Share %

Ireland & Luxembourg Rest of Europe

Source: Efama September 2018

irishfunds.ie

European ETFS - Headlines

2

Distribution

70% of European

ETFs listed on 2 or

more exchanges

3

Asset split

Equity €485 bn

Bonds €159 bn

Commodity €19 bn

Other €9 bn

4

Fee rates

Average TER

0.25% Bond Funds

0.38% Equity Funds

5

Product

trends

Smart Beta – AUM

€47 bn

Active – AUM €9 bn

(As of 31 July 2018)

1

AUM EU

ETFs

€672 bn as of 31

August 2018.

CAGR of 24%

since 2008.

Source: PwC Analysis

irishfunds.ie

7.8 12.3 17.7 18.4 19.7 16.5 16.8 4.1 5.3 10.5 10.5 17.6 23.9 27.3 30.5 35 42.9 43.3 47.4 52.9 55.6 53.3 25.5

35 41.8 31.7 36.5 39.9 42.3 65.1 70.2

82.4 46.5

20.7 33.9

47.5 42.6 46.5 46.6 49.4

81.2 81.8

109.8 167.8

23.8

43.3

62.4 68

95.6 128.8 136.5

222.3

280.5

355.2

375.3

0

100

200

300

400

500

600

700

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Others Germany France Luxembourg Ireland

European ETF Market by domicile

2008 to June 2018

Source: Efama September 2018, PwC Analysis

irishfunds.ie

Irish Common Contractual Funds - Headlines

Continuing to see a significant growth in CCFs

• 111 AIF CCFs - total NAV of €46bn

• 106 UCITS CCFs - total NAV of €31bn

(as at 31 August 2018/inclusive of sub-funds)

Why?

• Ability to achieve significant economies of scale while maintaining

treaty position

• Can result in significant reduction in tax drag when compared to

opaque fund structures

• Investor driven demand

– Pension funds

– HNW market (local feeders)

But….

• Recognition of tax transparency of CCF in Japan still unclear and

representations are continuing

irishfunds.ie

In first half of 2018:

• Equity AIFs experienced net outflows of EUR 12 billion.

• Net sales of Multi-Asset AIFs amounted to EUR 12 billion.

• Real Estate funds registered net inflows of EUR 20 billion.

• Other funds registered net inflows of almost EUR 57 billion.

• Money market funds structured as AIFs experienced net outflows of

EUR 3 billion.

• Bond fund AIFs had outflows of EUR 10 billion.

The European Investment Fund Industry:

Net Sales of AIFs

Net sales of AIFs:

EUR 64 billion during the first half of

2018

Source: Efama September 2018

irishfunds.ie

Alternative Investment Funds (AIFs)

Size of the European AIFs Industry

2008 – June 2018

Source: EFAMA September 2018

1,646 1,863 2,189 2,322

2,656 2,942

4,070 4,412

5,516 5,893 5,965

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q2, 2018

Net a

sse

ts in

€b

illio

ns

AIFs

irishfunds.ie

Hedge Funds - Headlines

Source: Preqin

• Europe-based hedge fund assets under management have reached

€587bn as of the end of Q1 2018, an increase of almost 10% in 2017.

• Europe-based hedge funds posted returns of 9.05% in 2017, the best

performance since 2013.

• The region recorded €27bn in net inflows for the year overall.

• 27 Hedge Fund Managers established in Europe in 2017.

• 179 new Hedge Funds launched by European Fund Managers in 2017.

• Over 40% of Global Hedge Funds are administered in Ireland.

irishfunds.ie

Hedge Funds - Europe-Based Hedge Funds

by Top-Level Strategy

1%

33%

14%

8%

12%

8%

14%

10%

Niche Strategies Equity Strategies Macro Strategies

Event Driven Strategies Credit Strategies Relative Value Strategies

Managed Futures/CTA Multi-Strategy

irishfunds.ie

Real Estate Funds - Headlines

Source: Preqin

• Europe-focused real estate funds held USD210bn assets under

management as at June 2017.

• 125 Europe-focused real estate fund, targeting USD44bn in investor

capital as at February 2018.

• Five year horizon IRR of 9.6% for Europe-focused real estate funds (as at

June 2017)

• European listed real estate companies provided a total return of 13.4% in

2017.

irishfunds.ie

Real Estate Funds

Emerging Trends in Real Estate®: Europe 2018

Source: PwC and Urban Land Institute

• The key concern for Europe’s real estate industry – as it has been for several

years – revolves around the availability of suitable assets

• Niche sectors based around various types of residential again dominate the

rankings. Student housing, hotels, retirement/assisted living and then

serviced apartments came out on top this year.

• Political stability, thriving economies, and cities that “work on being a

city” are what tick the boxes for Europe’s real estate industry. This year, most

of its major markets are judged to be doing well, with German cities taking

four of the top 10 spots in Emerging Trends Europe’s scorecard of prospects.

• 80% respondents believe that investment into UK property will decrease

as a result of Brexit, but this view is less pessimistic than last year (92%).

irishfunds.ie

Real Estate Funds

Emerging Trends in Real Estate®: Europe 2018

Source: PwC and Urban Land Institute

irishfunds.ie

• Total Assets under Management of EUR 507 billion for Europe-based

Private Equity Funds (September 2017); increase of 13% since December

2015.

• Total Fundraising in 2017 reached EUR91.9bn, Europe’s highest level

since 2006 and a 12% increase year on year (of which EUR7.7bn was

Venture Capital)

• The number of funds raising new capital increased by 15% to 542.

• Total Equity invested in 2017 was EUR71.7bn, increase of 29% year on

year and highest level since 2007.

• The number of companies receiving investment increased by 7% to

almost 7,000 of which 87% were Small and Medium Enterprises.

Private Equity Funds - Headlines

Source: Perqin and Invest Europe 2017 European Private Equity Activity Report

irishfunds.ie

Private Equity Funds - Private Equity-Backed

Buyout Deal Activity in Europe in 2017 by Location

irishfunds.ie

• As of January 2018, there were 82 Private Debt Funds located in Europe,

with USD 42 billion Capital Targeted.

• Europe-focused fundraising passed EUR 36 billion in 2017.

• Europe-focused funds have reached record-high dry powder totals with EUR

57 billion in commitments as at March 2018, up EUR 3 billion from end of

2017.

• 29% of Fund Managers believe Europe represents the best debt

investment opportunities over the next 12-24 months (November 2017)

• 47% of Investors believe Europe presents the best opportunities over

the next 12 months (June 2018)

• A significant increase in Loan Origination Funds

Private Debt Funds - Headlines

Source: Preqin

irishfunds.ie

Private Debt Funds - Europe-Focused Private

Debt Dry Powder, 2006 - 2018

irishfunds.ie

Conclusion

Consistent with Global trends:

• (European) Asset flows continue to increase,

• Alternatives, particularly real assets, private equity

and debt funds, are taking on a stronger role in

driving growth,

• Passives are core,

• ETFs proliferate.

irishfunds.ie

Tax treatments to be considered

Investing countries

- Withholding tax

- Tax filing

- Tax treaty (*)

- Type of income/gain

- Type of fund vehicle

- Holding ratio in investments

Japan

- Foreign dividend exclusion rules

- CFC rules

- Foreign tax credit (*)

- Timing of income recognition

- Type of fund vehicle

- Holding ratio in fund vehicle

Fund vehicle

Real properties

PE

infrastructure

Investors

return

Rent, dividend,

capital gain, etc.

Japan

Foreign

countries

irishfunds.ie

Recent updates – MLI / Foreign tax credit for

funds

Multilateral Convention to Implement Tax Treaty to Prevent BEPS (MLI)

• Effective from 1 January 2019 with the UK, France, Australia etc.

• Main impact to current treaties

Foreign tax credit for funds

• Effective from 1 January 2020

• Foreign tax credit against withholding tax on distribution from funds

irishfunds.ie

Coffee Break

Moderator:

irishfunds.ie

Panel Discussion: Raising Capital

in Europe with an Irish Fund

Structure

Mr Akira Inoue, General Manager, Sumitomo Mitsui

Trust Asset Management

Panellists:

Mr Koichi Sato, Director, Tokyo Marine Asset Management

Mr Brian Dillon, Partner, Dillon Eustace

Mr Kenji Nakamura, Partner, PwC Tax Japan

Mr Naoki Kubo, Partner, PwC Aarata

irishfunds.ie

Mr. Masahiro Tsuchiya,

Sumitomo Mitsui Trust Bank

Closing Address