Alfi rebuffs pro-Irish domicile report

Luxembourg assets "at all-time high" as the domicile continues to attract new fund initiators

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Some might say it would come as no surprise that a law firm earning its living from financial institutions doing business in and through Ireland, and which acts for 27% of Irish-domiciled investment funds by assets under management, might be keen to promote Dublin as the premier place to set up a funds business.

So it was that a survey of 200 global asset managers sponsored by Irish lawyers Matheson concludes Ireland is, by far and away, the leading European funds location. 

Apparently, 71% of global asset managers – if starting afresh with their fund ranges – would now choose Ireland for its superior legal and tax framework, its regulatory landscape and general business conditions.

The results cannot be attributed to skewing by respondents already based in Dublin, as, measured in terms of assets under management, more have their funds domiciled in Luxembourg (43%) rather than Ireland (41%).

The asset management firms of the managers polled are headquartered in North America (38%), Western Europe (35%), Asia-Pacific (13%), Latin America (10%), and the Middle East and Africa (4%).

Ireland is the preferred domicile across all criteria surveyed: 73% of global managers rank it as a top-three domicile in terms of its legal and tax framework; 72% rank it in the top three for business conditions for domiciling funds; and 67% of respondents rank Ireland as top three in terms of regulatory conditions.

Ireland is very highly ranked in all key markets, with three-quarters of US and UK managers saying they would choose it as a top-three domicile, if starting over. Ireland is the favoured jurisdiction overall, in all categories judged, for managers across all regions.

Matheson is at pains to stress the independence of the survey, conducted on its behalf by the Economist Intelligence Unit. But in announcing the conclusions of the poll, the firm could not resist trumpeting its home jurisdiction, where the value of funds domiciled is currently €1.3 trillion – up €117 billion last year compared with 2012 – as being “far ahead of its nearest rivals”. Michael Jackson, head of Matheson’s asset management and investment funds group, says: “We are now seeing a clear trend of funds moving to Ireland from competing European domiciles such as Luxembourg.”

The overwhelming conclusions of the survey will come as news to Luxembourg, ranked joint second in the poll (alongside Germany) as its funds industry is worth double that of Ireland and continues to grow. Net assets managed by investment funds under Luxembourg law increased by €193 billion to €2.6 trillion in 2013.

The Association of the Luxembourg Fund Industry (Alfi) says it finds the results of Matheson’s study “quite surprising as they do not reflect what we are or have been witnessing in our market”.

Alfi deputy director general Anouk Agnes says: “The fact is that we have been able since 2008 to attract roughly 100 new fund initiators every year to Luxembourg. We have over 700 different initiators from 61 different countries. We see a particular interest from Latin American players, especially from Chile and Brazil, as well as Asian-based asset managers. The assets in Luxembourg are at an all-time high.”

Alfi adds that in 2013, 50% of all net sales in European funds went into Luxembourg-domiciled products, while its market share of Ucits net sales in Europe amounted to 70%.

But that is not to say that Ireland cannot grow to challenge Luxembourg. Indeed, a recent report on asset management by PwC finds Ireland’s fund management industry has the potential to grow by 40% over the next seven years, although the consultant’s website states elsewhere “Luxembourg is the domicile of choice for global fund distribution and today 75% of worldwide fund registrations are allocated to Luxembourg products”.

Matheson’s survey also asks what the most important decision-making factors are for fund managers when choosing a European fund domicile. As regards financial and business factors, managers rank the cost of doing business as of greatest importance, followed by tax treatment of fund vehicles and the presence and range of double-tax treaties. In terms of market and distribution factors, managers rank speed to market as most important, followed by investors’ perceptions of a specific jurisdiction and its reputation and longevity as a funds centre. Amongst the legal and regulatory factors, managers rank the approach to implementing the alternative investment fund managers directive (AIFMD) as most important.

In fact, about £100 billion in hedge fund assets have been predicted to move onshore as AIFMD takes effect. In this respect Luxembourg and Ireland seem neck-and-neck in competing to win that business.

According to the Central Bank of Ireland, applications from 72 fund management firms are being processed at present, with 11 managers already authorised by the regulator, which is now expecting to process up to 90 applications between now and the deadline on July 22.

 

Likewise, Luxembourg says some 90 managers have applied to the local regulator, the Commission de Surveillance du Secteur Financier, for approval under the new regulations, including a dozen that are already approved. 

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