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irishfunds.ie
10 April 2018
Irish Funds Madrid Seminar 2018
irishfunds.ie
Hosted by
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Supported by
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Ms Síle Maguire
Ambassador of Ireland to Spain
Welcome Address
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Kieran Fox
Irish Funds
Irish Funds – An Introduction
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Irish Funds Industry Overview
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A Global Funds Centre…
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For Global Distribution
irishfunds.ie10
Total Assets under Administration
- split between Irish domiciled & Non-Irish funds
Source: Central Bank of Ireland December 2017
irishfunds.ie11
Irish Domiciled Assets
• UCITS represent 75% of
Irish Domiciled Assets
• 88 UCITS Man Cos
• 161 AIFMs Registered or
Authorised
• 642 AIFMs operating in Ireland on
cross border basis
• 410 ICAVs established
(since 18 March 2015)
Source: Central Bank of Ireland
2018
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
1313 irishfunds.ie
Net Sales into Irish Domiciled Funds
Source: Central Bank of Ireland 2018
• > 30% of net sales
into all European
funds in 2017
irishfunds.ie
Other Developments….
• Updating of Ireland’s Investment Limited Partnership Legislation
• Legislative amendments approved by Irish Government.
• Entering legislative process
• Will provide additional scope for private equity and real asset funds.
• European Commission ESAs Proposals
• While there are aspects to the European Supervisory Authorities (ESAs) proposals we welcome, there are a number of
areas which are of significant concern. We have shared our views in Ireland and in Europe.
• Strong advocates of delegation to globally based experts.
• Loan Origination
• New enhancements have been made to the L-QIAIF.
• Tax Transparency
• OECD has awarded Ireland the highest international rating on tax transparency and exchange of information.
• EU Cross Border Distribution
• Consultation on removing barriers to Cross Border Distribution submitted 2016 and follow-up questionnaire completed
2017.
• We have subsequently met with the European Commission.
• Expected Q1 2018
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Other Developments….
• Pan European Personal Pension Plan (PEPP)
• Industry white paper published on PEPP.
• We have subsequently met with the European Commission.
• Financial Action Task Force (FATF) Mutual Evaluation Report (MER) of Ireland
• FATF’s assessment of Irelands anti-money laundering and counter terrorist financing concluded that “Ireland has a
sound and substantially effective regime to tackle money laundering and terrorist financing….” In addition the
Report highlights “National coordination mechanisms… and the Private Sector Consultative Forum (PSCF) were
fruitful in broadening the understanding of its ML and TF risks across all relevant agencies and with the private
sector.”
• CBI engagement re Exchange Traded Funds (ETF)
• Responded to Central Bank of Ireland (CBI) ETF discussion paper and engaged with the CBI throughout the
process.
• Consultation paper on CIS Liquidity Risk Management
• Response provided to the International Organization of Securities Commission (IOSCO) Consultation paper.
irishfunds.ie
Conclusion
• EU Member & Strategically Positioned
+
• International Hub for Globally Distributed Investment Funds
+
• Unrivalled Experience and Expertise in the Widest Range of Fund Structures
Moderator:
Panellists:
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Panel Discussion: Why Ireland? Your
European Hub
Sarah Murphy, PwC
Brendan Hayes, ICR
David Stocks, Omega
Jennifer Fox, Dillon Eustace
Juan Prieto, Corporance Asesores De Voto
irishfunds.ie
Ken Owens, PwC
Update on Brexit
1919 irishfunds.ie
Brexit: three interdependent themes
Distribution
Management
Models
(‘Delegation’)
Growth
OVER 2,400 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 2016
Monterey Ireland Fund Report 2017
Current context Target outcome
2020 irishfunds.ie
Brexit Timeline
Possible Transition Period
Indicative Deadline
for SMIC &
Delegating Super
ManCo Authorisation
August 2018Indicative Deadline
for MiFID & ManCo
with Add On
Authorisation
June 2018
2121 irishfunds.ie
International asset management centre
Growth
‘The Basics’
•Predictability / efficiency of regulatory process
•12.5% corporate tax rate
•Common law system
•Only English-speaking country in the Eurozone
•Less expensive than Zurich, Paris & Luxembourg1
Asset Manager Activity
Infra-structure
Re-affirmation of Ireland’s attractiveness as
an international asset management centreOpportunity
Benefits
SolutionProvide managers with options to support the
establishment of a physical presence in Ireland
NOTES:
1. Source PwC
2. http://www.iaim.ie/why-ireland (STEM = Science, Technology, Engineering &
Mathematics) & http://www.hea.ie/sites/default/files/awards_-
_all_undergraduate_by_level_and_field.xlsx
3. IFS 2020 Action Plan 2017 (http://finance.gov.ie) & IDA Ireland
4. MiFID firms, UCITS ManCos, Irish AIFMs & Non-Irish AIFMs - CBI
• Space for 100K new employees by 2020, 100K new houses3
• Leading global tech centre & fintech location
• London-Dublin: Most flight options in Europe
• 35K+ employed in international financial services in Ireland, 16K in funds industry
• 130K degree-level graduates across business, law and STEM w/ 20K new grads p.a.2
• 800+ investment firms active in Ireland4
• Increased presence of front office activities
• 18 of the top 20 global AMs have Irish funds
• €4trn total AuA, €300bn managed from Ireland2
• AM counterparties already in transit from UK
2222 irishfunds.ie
Brexit: key points to pursue
• Encourage UK Treasury & FCA to recognise
Irish funds as eligible investments for UK
investors post-Brexit
• Encourage ESMA to negotiate a co-operation
agreement with the FCA as a 3rd country
regulator under AIFMD, with subsequent
signing by CBI.
• Encourage the Irish Government to support
growth in employment, diversifying skill sets
and infrastructure to assist businesses
relocating to Ireland due to Brexit.
Distribution
Management Models
Growth “Our three key
themes are
interdependent.”
DistributionManagement
Models(‘Delegation’)
Growth
2323 irishfunds.ie
Structuring options: Management models
DEFINITIONS:
• ‘MiFID Firm’: Investment firms authorised under Markets in Financial Instruments Directive (2007, to be replaced by MiFID 2 / MiFIR in January 2018)
• ‘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 ManCo w/ Delegates (‘v1)
SMIC• Simple option for single umbrella fund
• ‘v1’: widely used standard model w/ delegation option
• ‘v2’: ‘add-ons’ enable management w/out MiFID manager as delegate, including mandates
• Wider range of permissions availableGlobal
Asset
Managers
Regional
Asset
Managers
Multiple Asset
Manager types
Management
Models (‘Delegation’)
irishfunds.ie
Current developments
• Areas where further negotiations are required include geographical indications of various
goods, Data Protection and the automatic recognition of judgements.
• Two significant areas of divergence exist: (1) the governance of the Withdrawal
Agreement; and (2) Northern Ireland border issue.
• Negotiations will continue on the Future Relationship between the EU and the UK.
• The EU negotiating guidelines have been updated with new text which suggests the EU
will aim to conduct future financial services trade based on reviewed and improved
equivalence mechanisms.
• Nothing is agreed until everything is agreed.
• 28 March: UK regulators have provided some welcome clarity on what this means for
European Economic Area (EEA) firms passporting into the UK.
• EU regulators have made no announcements about any relief afforded by the transition
agreement for firms looking to move activity to the EU, however.
• This difference in approach is expected to continue, pending political progress in the
negotiations about the likely future state arrangements
irishfunds.ie
CBI enhances its Authorisation Processes
• The Central Bank has now concluded a comprehensive review of the way it deals with the issues
covered by the three ESMA Opinions.
• During the review, the Central Bank identified process enhancements, related to the authorisation of
investment fund managers authorised under the UCITS Directive and AIFMD and investment firms
authorised under MiFID. The application forms for UCITS Management Companies, UCITS Self-
Managed Investment Companies, Alternative Investment Fund Managers (AIFMs) and MiFID Firms
will be updated to incorporate the following requirements:
Details and rationale for the geographical distribution of planned activities.
Objective justification for delegation arrangements in relation to critical functions.
Details of due-diligence undertaken during selection process.
Information on Business Continuity arrangements.
Information on how Legal Risk is assessed.
Details on Delegate Remuneration Requirements.
Details on how Best Execution obligations continue to be met when dealing with execution venues
outside of the EU.
• In the interim until the relevant application forms have been updated, the items listed above will be
incorporated as part of the Central Bank’s authorisation process.
2626 irishfunds.ie
Structuring options: detail
Self Managed Investment
Company (SMIC)
Super ManCo w/
Delegates (‘v1’)
Super ManCo w/ Add-on
Authorisations (‘v2’)
MiFID Firm
Authorisation indicative
timeline
Allow 6 to 8 months during high
volume periods
Allow 6 to 8 months during
high volume periods
Allow 8 to 9 months during high
volume periods
Allow 9 to 10 months during
high volume periods
Activities (PM = portfolio
management, RM = risk management)
Retain oversight of PM & RM but
delegate day to day activities
Retain oversight of PM &
RM but delegate day to day
activities
Performs day-to-day PM & RM Full range of services
Manage other fund umbrellas? No Yes Yes Yes
Manage/advise Segregated
Mandates?
No No Yes, via add-on licenses without need
for MiFID delegate
Yes
Substance requirements • 2 Irish-resident directors
• 2-3 Designated Persons1
• 2-3 Irish-resident
directors1
• 2-3 Designated
Persons1&2
• 2-3 Irish-resident directors
• 2-3 Designated Persons1
• Chief Investment Officer / Managing
Director
• Head of Risk/Compliance and
Finance, internal audit.2
• Substantive presence
required in Ireland3
• Specific roles based in
Ireland2:
• Legal & compliance
• Financial control
• Risk Management
Delegation / Outsourcing CBI permits delegation of day-
to-day PM and/or RM activities
CBI permits delegation of
day-to-day PM and/or RM
activities
CBI permits delegation of day-to-day
PM and/or RM activities
Outsourcing allowed (including
to other EEA states or 3rd
countries) if in line with
applicable law and best practice
1. Designated persons not all required to be Irish resident and can be directors or employees of the Investment Manager. For ‘low’ PRISM rated firms, half of the directors and at least 2 Designated Persons performing half of the
managerial functions are required to be EEA-resident. For ‘medium’ PRISM rating firms, 3 directors or 2 directors plus 1 designated person should be Irish resident.
2. The need for specific roles may differ on a case-by-case basis, depending on complexity and number of branches.
3. ‘Substantive presence’ for MiFID: the firm’s board and management run the firm from Ireland and make decisions in Ireland with sufficient staff and resources to manage the risks.
2727 irishfunds.ie
SMIC Super ManCo w/ Delegates (‘v1’) Super ManCo w/ Add-on Authorisations
(‘v2’)
MiFID Firm
Capital
Required
€300,000 initial capital (which
can be met using shareholder
funds)
One quarter of its total expenditure in
its most recent annual accounts and
€125,000 plus an additional amount
of up to 0.02% of any AUM
exceeding €250m whichever is
greater, subject to a maximum
amount of €10million
One quarter of its total expenditure in its
most recent annual accounts and
€125,000 plus an additional amount of up
to 0.02% of any AUM exceeding €250m
whichever is greater, subject to a
maximum amount of €10million
Will be calculated in accordance with
CRD IV / CRR requirements
Pros • Works well if no other funds
managed
• Less staff on the ground
• Can manage multiple fund
umbrellas
• Can passport to other EEA
jurisdictions
• Less staff on the ground than v2 or
MiFID option
• Can perform full PM activities or
delegate
• Can manage multiple fund umbrellas &
mandates
• Can passport to other EEA jurisdictions
• Less staff on the ground than MiFID
option
• Wide range of
permissions/potential business
lines available
• Can passport throughout EEA
without seeking additional
authorisations
Cons • Cannot perform all PM
activities
• Cannot manage or advise
mandates
• Must delegate to regulated
investment manager
• Cannot perform all PM activities
• Cannot manage mandates
• More staff on the ground than SMIC or
v1 option
• Add-on authorisations possible, which
may be subject to local review when
passporting to other EEA jurisdictions
• More staff on the ground
• Subject to CRD IV / CRR
requirements
• MiFID 2 changes in Jan-2018
Structuring options: pros & cons
Moderator:
Panellists:
irishfunds.ie
Panel Discussion: Alternatives and
opportunities in this area
Jorge Revilla, KPMG
Laura Gonzáles, Allfunds Bank
Des Fullam, Carne
José María Amusategui, Cygnus Asset Management
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Patrick Atkinson, PwC
Closing Remarks
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Annual Global Funds Conference 2018
Now in its 20th year, the Irish Funds
Annual Global Funds Conference is a
highlight of the international funds industry
calendar.
The conference brings together prominent
industry speakers to discuss current
issues and challenges facing the global
funds industry.
For further information on registration,
sponsorship and exhibition please visit
irishfunds.ie/conference2018.
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Hosted by
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