The Irish funds industry is a vital national industry that has grown far beyond the docklands of Dublin, where it all began. Professionals from every county in the Republic of Ireland now work for it. Moreover, with the exception of Dublin, every county has seen employment growth in the sector since 2018.
To grasp the origins of the industry, we must go back to 1987, when the International Financial Services Centre (IFSC) was established under legislation drafted by then-prime minister Charles Haughey.
The decision followed the 1986 Finance Act, which included financial incentives to encourage private sector investment in the urban renewal of Dublin's docklands. This was updated in 1987 to include a special 10% corporation tax rate for businesses forming in the IFSC. With EU approval, the IFSC tax incentive zone was established.
Although the process of approving IFSC companies ended in December 2000, those that were formed prior to that date were eligible for the 10% rate until the end of 2005. Since then, all companies in the international financial services sector have paid corporation tax at the current rate of 12.5 percent, which Ireland vigorously defends and views as a competitive advantage over other jurisdictions.
Irish Funds, which was founded in 1991, represents fund management firms, investment/asset managers, fund administration/depositary services, auditing/tax and legal services, as well as other support services such as securities and technology/software.
Moving forward to 2022, the industry has continued to grow, expanding far beyond the docklands of the capital. Nearly half of all Irish funds now have a presence outside of Dublin. Nearly 180 businesses directly employ over 17,000 people across all counties. Over 34,000 jobs are supported by the sector across Ireland.
According to Irish Funds' 'Indecon Economic Impact Assessment Report 2021,' growth outside of Dublin has been double that of the capital since 2018, and local communities have benefited from €14.8 billion in economic output.
According to Irish Funds chief executive Pat Lardner, recent figures have highlighted the funds industry's contribution to regional development, with the number of employees based outside of Dublin increasing by 40% in the last two years.
Munster's southern province and its cities, Cork and Limerick, have reaped significant benefits. A pool of experienced talent, a pipeline of graduates with experience in the funds industry, and lower operating costs than the capital are all reasons given for companies to expand here.
"In the south-west, the financial services industry is supported by a strong talent pipeline of highly educated potential future employees from the two regional universities," said Conor Healy, chief executive of the Cork Chamber of Commerce. "UCC and Munster Technological University have a combined total of over 40,000 students and 2,000 graduates in business or finance disciplines each year. "
Currently, 23 funds and asset management companies employ over 1,400 people in the Cork area, making it Ireland's second financial services hub after Dublin.
BNY Mellon, HedgeServ, Citco, Ipes, and Apex Fund Services have all set up shop in Cork. AIG, Monex, Global Shares, and Continuum are among the other major investors in the sector, while Deutsche Borse Group's post-trade services arm Clearstream, which has grown rapidly in Cork, is significantly expanding its operations.
Cork was chosen as the primary European hub by the Asset Management Exchange AMX. "As an asset management firm based in the regions, we are an attractive proposition to finance professionals who don’t want to travel internationally, or indeed individuals that want to relocate home from global finance centres," says Eoin Motherway, Ireland country head.
Global Shares, based in Clonakilty, was acquired by JP Morgan for $730 million (€665 million), making it one of the largest exits by an Irish fintech.
Alter Domus, a specialist fund administrator, opened new offices for its European Centre of Excellence in Cork in February, investing in a new 20,000 square foot (1,860 square meter) workspace. The company also announced the creation of 80 new jobs in accounting, structured credit, fund management, depositary, compliance, technology, and automation at its new headquarters, which will be filled this year. It went on to say that it was on track to fill the 100 positions announced in January.
Alter Domus is based in Cork and serves as a European hub for global debt and capital markets, private equity, real estate, and infrastructure investors and managers, with over €1.3 trillion in assets under management worldwide. Alter Domus has increased its headcount in Ireland to more than 260 people, including its Dublin office.
Finance Minister Seán Fleming said the move was "aa strong example of the role that alternative funds can play in developing high-quality jobs that have a real impact on our economy" at the event's official opening.
"This year we completed our full service offering in Ireland with the launch of depositary and AIFM services alongside fund administration and corporate services," said James McEvoy, Alter Domus' country executive for Ireland. "Ireland has massive growth potential in the alternatives space and we are delighted to be so well positioned in the market today to support this growth ."
Nearly 1,000 people work for 13 funds and asset management companies in Limerick. Northern Trust was one of the first businesses to establish a presence in the city, opening its second Irish office in 2007.
FundRock, whose group head of business development, Paul Spendiff, says, "setting up operations in Limerick was the best decision I ever made," employs several hundred people.
Spendiff goes on to say that he was astounded by the caliber of personnel available and that senior leaders were able and willing to accept positions there. Many people have returned to the area and intend to stay. He says, "so many of our people have a field that they want to come back to and build a house in."
There is certainly no shortage of ambition in the region. Cork City Council's latest draft development plan aims to create 31,000 jobs over the next seven years.
By 2040, Ireland's population is expected to grow by 1 million people, with Cork expected to grow by 100,000 people, more than doubling its population in just 20 years. Limerick, right next door, has the largest single commercial property program investment outside of Dublin.
"The international financial services sector is now a national industry," said Finance Minister Fleming, "and I am grateful to the funds industry for the role they have played in growing the sector outside of Dublin … and the growing impact it is having in the regions."
"As we emerge from the pandemic, Irish Funds will continue to support investment and drive sustainable growth across the island," says Lardner of Irish Funds.
Indeed, the growth Lardner mentions is not slowing down. Indecon asked firms for their growth projections for business volumes in the five years leading up to 2025 as part of Irish Funds' research.
Growth is expected to be between 25% and 29% over that time period, with direct employment rising from 17,273 full-time employees in 2020 to nearly 22,000 by 2025. The tax bill is expected to rise from €914 million to €1.16 billion.
Covid-19 may eventually benefit the regions in some ways. People were returning from abroad at the start of the pandemic, according to David Conway, CEO of property development firm Limerick Twenty Thirty, and they are now returning from Dublin to Limerick. According to the Indecon economic report, "significant percentages of their employees are likely to continue to work remotely," according to firms in the sector.
The Irish funds industry has grown every year except one since its inception. Not surprisingly, the government's upcoming action plan under the Ireland for Finance banner will aim to build on those solid foundations – and the future looks bright for the regions.
By fLEXI tEAM