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22 irishfunds.ie
10 October 2017
Los Angeles Seminar
33 irishfunds.ie
PREMIUM SPONSORS
44 irishfunds.ie
EVENT SPONSORS
55 irishfunds.ie
Pat Lardner
Chief Executive - Irish Funds
Welcome Remarks
Los Angeles Seminar
66 irishfunds.ie
Total Assets Under Administration – Split between Irish domiciled & Non Irish Funds
434 584 728 807 646 748964 1,055 759 1,344
1,6641,899 2,085 2,231
636838
965
1,394 1,398 1,443
1,883 1,886
2,199
2,722
3,375
3,806
4,0954,251
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 June-17
EU
R B
illio
n
Total Assets Under Administration
Net Assets Domiciled Net Assets Non DomiciledSource: Central Bank of Ireland, 2017
77 irishfunds.ie
Irish Domiciled Assets
• UCITS represent 75% of Irish Domiciled Assets
• 86 UCITS Man Cos
• 156 AIFMs Registered or Authorised
• 597 AIFMs operating in Ireland on cross border basis
• 364 ICAVs established (since 18 March 2015)
Source: Central Bank of Ireland, 2017
88 irishfunds.ie
European Investment Fund Landscape
• €13 trillion in assets
• €8 trillion UCITS
• €5 trillion Alternative Investment Funds (AIFs)
• €1 trillion of net inflows into UCITS over last 3 years
• €463 billion net inflows into European funds 2016 (>30% of which went to Irish domiciled funds)
Source: Central Bank of Ireland, 2017
99 irishfunds.ie
Growth of Largest European Fund Domiciles
2012 2013 2014 2015 2016
Europe 113 123 142 158 178
Luxembourg 114 125 148 167 177
Ireland 116 127 157 180 198
France 109 110 114 121 129
Germany 113 124 140 153 166
UK 117 135 159 179 177
-
50
100
150
200
250
% G
row
th
116 127157
180198
• Percentage Growth Rates in Assets in over the last 5 years for the largest fund domiciles in Europe
• Ireland is the fastest growing domicile
• 198% growth in Irish domiciled assets in the last 5 years
• Versus European average of 178%
2011 base yearSource: EFAMA Statistics, 2017
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Irish Funds: Passport to Europe & Beyond
UCITS funds & AIFMs benefit from an EU wide passport and can be sold in any other EEA member state without need for additional authorisation
Top 10 countries where Irish Funds registered for sale
1. UK 6. Austria
2. Germany 7. Luxembourg
3. France 8. Sweden
4. Switzerland 9. Italy
5. Netherlands 10. Spain
Global Distribution of Irish Funds: 70 countries
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Irish Funds – Maximising Distribution
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Irish Domiciled Funds – Net Sales
-30.0
20.0
70.0
120.0
170.0
Dec-13 Dec-14 Dec-15 Dec-16 YTD July 2017
Net Sales into Irish funds by type € Bn
Equity Funds
Bond Funds
Balanced Funds
Money MarketFunds
AIF
Net sales for YTD July 2017 have already surpassed the total for 2016 (by >€45bn) – which itself was a record year
98,463 85,465
135,668114,706
139,416
185,100
0
50,000
100,000
150,000
200,000
2012 2013 2014 2015 2016 YTD - July2017
EU
R M
nNet Sales - Total Domiciled Funds
Net Sales - Total Domiciled Funds
Source: Central Bank of Ireland, 2017
1313 irishfunds.ie
ETFs - An Irish Success
Ireland as a Domicile for European ETFsTotal Assets of European ETFs - €Bn
Source: Irish Funds, June 2017
Ireland€310bn
Rest of Europe€248bn
56%
44%
€41bn
€3bn
Net Sales into All European ETFs 2016 €Bn
Ireland
Rest of Europe
93%
7%
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Looking Ahead – Brexit: Three interdependent themes
DistributionManagement
Models(‘Delegation’)
Growth
OVER 2,000 IRISHFUNDS SOLD TO UK
INVESTORS1
€613 bn2 IN IRISH FUND ASSETS MANAGED BY
170+ UK FIRMS IN IRELAND2
OVER 2,000 IRISHFUNDS SOLD TO UK
INVESTORS1
€613 bn2 IN IRISH FUND ASSETS MANAGED BY
170+ UK FIRMS IN IRELAND2
Continuity in UK investor access to EU/Irish fundsContinuity in UK investor access to EU/Irish funds
Continuity in UK firm
management of Irish funds
Continuity in UK firm
management of Irish funds
Increase Ireland’s growth trajectory as an
international asset management centre
Increase Ireland’s growth trajectory as an
international asset management centre
SOURCE: 1-Lipper IM Dec 20152-Monterrey Ireland Fund Report 2016
Current context Target outcome
1515 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-affirm Ireland’s attractiveness as an international asset management centre
OpportunityOpportunity
BenefitsBenefits
Solution Provide UK 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 Ireland4. MiFID firms, UCITS ManCos, Irish AIFMs & Non-Irish AIFMs
• 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, 14K 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
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PwC
Colin Farrell
Brexit Update
1717 irishfunds.ie
Brexit timeline
1818 irishfunds.ie
Three interdependent themes
DistributionManagement
Models(‘Delegation’)
Growth
OVER 2,000 IRISHFUNDS SOLD TO UK
INVESTORS1
€613 bn2 IN IRISH FUND ASSETS MANAGED BY
170+ UK FIRMS IN IRELAND2
OVER 2,000 IRISHFUNDS SOLD TO UK
INVESTORS1
€613 bn2 IN IRISH FUND ASSETS MANAGED BY
170+ UK FIRMS IN IRELAND2
Continuity in UK investor access to Irish/EU fundsContinuity in UK investor access to Irish/EU funds
Continuity in management
of Irish/EU funds
Continuity in management
of Irish/EU funds
Increase Ireland’s growth trajectory as an
international asset management & servicing
centre
Increase Ireland’s growth trajectory as an
international asset management & servicing
centre
SOURCE: 1-Lipper IM Dec 20152-Monterrey Ireland Fund Report 2016
Current context Target outcome
1919 irishfunds.ie
Structuring options: Management models
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 available
NOTES:
• ‘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
• This depiction is intended to be for informational purposes only and all requirements should be reviewed alongside a firm’s / fund’s legal counsel.
Global Asset
Managers
Global Asset
Managers
Regional Asset
Managers
Regional Asset
Managers
Management Models
(‘Delegation’)
2020 irishfunds.ie
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 many other global financial centres
Asset Manager Activity
Infra-structure
NOTES:1. CBI Register: MiFID firms, UCITS ManCos, Irish AIFMs & Non-Irish AIFMs2. IFS 2020 Action Plan 2017 (http://finance.gov.ie) & IDA Ireland3. 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
• Space for 100K new employees by 2020, 100K new houses2
• Leading global tech centre & fintech hub
• London-Dublin: Most flight options in Europe
• 35K+ employed in international financial services in Ireland, 14K in funds industry
• 130K degree-level graduates across business, law and STEM w/ 20K new grads p.a.3
• 800+ investment firms active in Ireland1
• 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
What does the industry in Ireland provide?
2121 irishfunds.ie
What does the industry in Ireland provide?
EU/EEA Single market access
Global investor access
√Efficient, predictable & robust regulator
Low tax / low cost environment
Commitment from Government
Service excellence & scale
Infrastructure: legal, language, education & telecoms
7thIMD WORLD
COMPETITIVENESS 2016 YEARBOOK
1st
FLEXIBILITY AND ADAPTABILITY OF
PEOPLE
1st
IN EUROPE FORCOMPLETION OF
3RD LEVEL EDUCATION
2222 irishfunds.ie
A&L Goodbody
John Aherne
MiFID 2 Update- Impact on US Managers
2323 irishfunds.ie
Background and overview
• MiFID II: taking effect from 3 January 2008
– Central measure for regulation of investment firms conducting investment services and markets in the EU
– Seeks to make financial markets in Europe more resilient, transparent and investor-friendly in response to the financial crisis
– UCITS management companies/Alternative investment fund managers (AIFMs) out of scope when managing and distributing UCITS/AIFs
– US based asset managers, with no EU establishment, generally out of scope but potential indirect impacts
– More complicated where US based manager is a delegate of an EU MiFID firm and there is a contractual look through approach
2424 irishfunds.ieMAIN-37745394-1
• Transaction reporting
• Equities/on exchange
• Repapering broker terms
• Post-trade transparency
• Position limits• Dark pools –
double volume cap• Direct market
access
• Product governance
• Costs transparency• Commissions
• Investment research
• Best execution• Transaction
reporting• Taping &
Recordkeeping Advisory
Delegation from EU
MiFID firm
EU MiFID firm
Distribution
Trade with EU CPs
Trade on EU Trading
Venues
2525 irishfunds.ie
Distribution
Product governance and distribution
– Scope: collaboration with a MiFID manufacturer/sales or marketing via an EU MiFID distributor
– Target market
– Product approval and oversight framework
– Information sharing and reporting (negative target market)
EU distributor remuneration models- Prohibition for certain segments (independent advice and managed)
- More onerous thresholds and disclosure for other commissions on other channels
Costs transparency- Point of sale and ongoing reporting including breakdown of product
costs
- Transaction costs
MAIN-37745394-1
2626 irishfunds.ie
Investment research
• Buy-side: prohibition on receiving inducements in the form of research leads to unbundling costs of execution and research
• EU Sell-side: obligation to separate the costs
• Hard dollar approach: options for EU investment managers:
– client funded research payment account
– funded from P&L
Impact for US investment managers/EU interactions with US sell-side
- Outsourcing requirements
- US broker dealers/investment advice issue
- Note position on direct delegation from an Irish AIFM/UCITS manco, not in scope!
MAIN-37745394-1
2727 irishfunds.ie
Trading/Markets issues
• Some key areas to flag:
– Best execution
– Transaction reporting (T+1); enhanced information required from non-EU firms when trading in EU instruments with an EU broker/counterparty or on an EU trading venue
– Impacts on OTC trading and dark pool trading
– Price discovery: expansion pre/post trade transparency to fixed income, ETFs and derivatives
– Position limits for commodity trading
– Direct market access via EU brokers
MAIN-37745394-1
2828 irishfunds.ie
Access to EU capital
• Third country access to EU customers (e.g. via managed accounts)
– Set up a Branch to access all customer types locally and passport services to wholesale clients
– Register with ESMA to provide investment services without having an establishment subject to ESMA equivalence assessment
– Rely on reverse solicitation (“exclusive initiative of the client” test)
– National regimes if available (e.g. Ireland: preserves overseas persons exemption regime)
• AIF/UCITS vehicles with a delegated services model remain the optimal models
MAIN-37745394-1
2929 irishfunds.ie
• Michelle Ridge, Matheson
• John Perry, Deloitte
Irish Funds Industry Update Talks
3030 irishfunds.ie
Investment Limited Partnerships
3131 irishfunds.ie
Updates to Investment Limited Partnership legislation
• Many PE managers already active in Ireland
• ICAV can cater for most PE features
• However, LP is conventional structure for PE funds
• Legislative Reform
– Strategic priority – Government’s Strategy for Ireland’s Financial
Services Sector (IFS 2020) Action Plan 2017
– Investment Limited Partnership (Amendment) Bill 2017 – approved for
drafting on 18 July 2017
3232 irishfunds.ie
Investment Limited Partnership Amendments
• Expected changes include:
– Bringing the range of publicly available information in line with other
fund vehicles
– Allow non-material changes to be made to the partnership agreement
without an investor vote
– Expanding the express limited liability safe harbours for limited partners
– Allow for the establishment of umbrella ILPs
– Relaxing limitations on withdrawals of capital
3333 irishfunds.ie
Background to CP86
• European Directives – AIFMD and UCITS – require European
passported funds to have a European management company
• Management company can be external or internal (“SMIC”)
• Management company cannot be “letter-box entities”
• Management companies can delegate investment management to
other entities including US managers
3434 irishfunds.ie
CP86 Update
• Final guidance issued on 19 December 2016
– Existing regime requires the DP to be located in Ireland or to be a
Director of the relevant company
– CB has granted additional flexibility on location
– All management companies must have 50% of directors and DPs in EEA
3535 irishfunds.ie
Timing and managerial functions
• Existing entities have until 1 July 2018 to implement the guidance, including replacing the existing managerial functions with the six new ones (unchanged over those previously proposed by the Central Bank) namely:
1. Fund risk management
2. Operational risk management
3. Investment management
4. Regulatory compliance
5. Capital and financial management
6. Distribution
3636 irishfunds.ie
3737 irishfunds.ie
3838 irishfunds.ie
Chairperson, Irish Funds
Partner, Matheson
Tara Doyle
Closing Remarks
3939 irishfunds.ie
PREMIUM SPONSORS
4040 irishfunds.ie
EVENT SPONSORS
4141 irishfunds.ie
10 October 2017
Los Angeles Seminar
