Regulatory agenda presents industry with significant challenges and opportunities; Ireland's Presidency of the EU offers real opportunity to lead on AIFMD implementation and shape the introduction of UCITS V and VI; Innovation and adaptability key to future industry growth
LONDON and DUBLIN, 5 February 2013 — Rachel Turner, Head of Offshore for BNY Mellon, looks at the challenges facing the Irish funds industry in 2013 as well as the opportunities for growth - and outlines how Ireland's Presidency of the EU represents a unique opportunity to shape future regulation.
The regulatory agenda for 2013 — what is the real impact?
"One of the greatest challenges facing the Irish funds industry in 2013 is increased regulation at both a global and local level. How quickly the industry in Ireland adapts to these changes will be critical to maintaining the upward growth trajectory the industry has enjoyed in recent years.
"The much debated Alternative Investment Fund Managers Directive (AIFMD) will finally come into effect in July of this year. And while the changes have long been anticipated, a much tighter timetable following the completion of Level II measures at the end of last year will test the preparedness of both investment managers and service providers.
"Whatever the pros and cons of AIFMD, there is no doubt it will represent a significant sea change for the funds industry in Ireland. It will transform how funds are managed, how we provide services, as well as the number of services a fund will require. As a result, the pressure in the new operating environment will be on service providers to offer the full A to Z of complimentary services to investors.
"There exists a significant opportunity here for Ireland to react and adapt quickly, and put in place a structure for continued growth. The Irish Fund industry should look to leverage the implementation of AIFMD to expand its capabilities beyond core activities of fund administration and custody, by, for example, introducing new ancillary services such as risk management to the Irish funds landscape.
"If the Irish funds industry can embrace AIFMD and expand its capabilities - providing a one-stop solution to investors - it will reap the rewards.
"Another potential development - The Shadow Banking Review — has the potential to present additional challenges for the industry. The Review will examine money market funds and adjust how these funds are priced and constructed. Given our unique perspective - as we are both manufacturer of and service provider to Money Markets funds - BNY Mellon is working collaboratively with all stakeholders to assess the implications of the various solutions. There is no one obvious solution but we expect greater clarity later this year.
Ireland's Presidency of the EU
"Ireland's EU Presidency in 2013 presents Ireland with a unique opportunity to influence and shape future regulatory direction for the wider funds industry. No other EU country has the in-depth knowledge and experience of the funds industry built up over a number of decades and the inclusion of a number of key agenda items of consequence to the industry will give us a front row seat over the next six months.
"I expect Ireland to take a leading role with regard to shaping UCITS V and ensuring its successful implementation over the duration of the Presidency.
"UCITS VI will follow this, and although we will no longer hold the Presidency when this comes into effect, the Irish Presidency will need to make significant progress in laying the groundwork for the next iteration of these directives. My hope would be that UCITS VI will see a greater drive towards harmonisation within the funds industry, taking on board the lessons learned from past directives and building it into this new legislation.
Opportunities for future growth
"The Irish funds industry is well known in the US and in the UK and we will continue to attract new investors from these regions in 2013. In order to continue to grow however, Ireland needs to begin to target emerging distribution markets such as South America and the Middle East, in addition to continuing to raise its profile in Asia.
"Assets serviced by the Irish funds industry reached an all-time high of €2 trillion in 2012. The industry continues to lead the way when it comes to additional flows, with over 40% of UCITS asset flows in Q1 2012 coming through Irish vehicles, and over 10% growth in net assets of UCITS in the first half of last year. I firmly believe that this is down to the fact that Ireland is still seen as a good place to do business from a funds perspective, despite the financial crisis. We are still seeing a huge appetite from investors to place money in Ireland, so I am optimistic that we will reach €2.5 trillion in assets serviced by the Irish funds industry by the end of 2013.
"The financial world has changed, and Ireland has been able to adapt quickly to a number of challenges over the years because we have had the intellectual capital at our disposal to cope with some of the more complex funds in the market — this has been the success story of the Irish funds industry. Increased regulation will further test our capability to be innovative, however if we can continue to stay ahead of the curve and adapt quickly, and continue to work with a regulator that is cognisant of the complexities of the funds industry, I believe that we will continue to thrive."
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 36 countries and more than 100 markets. As of December 31, 2012, BNY Mellon had $26.7 trillion in assets under custody and administration, and $1.4 trillion in assets under management. Whether clients are looking to create trade, hold, manage, service, distribute or restructure investments, BNY Mellon can act as a single point of contact for their investment needs. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com, or follow us on Twitter @BNYMellon.
BNY Mellon opened its first office in Ireland in 1994. It currently employs 1,800 employees in Ireland, located in Cork, Wexford and Dublin and offers a broad range of services to traditional and alternative asset managers, banks, pension funds, insurance companies and corporates. In Ireland, BNY Mellon offers a range of services including asset servicing, alternative investment services, depositary receipts and corporate trust. Pershing, a subsidiary of BNY Mellon, also has a presence in Ireland.
This press release is issued by The Bank of New York Mellon to members of the financial press and media. All information and figures source BNY Mellon unless otherwise stated as at 31 December 2012. The Bank of New York Mellon, London Branch, registered in England and Wales with FC005522 and BR000818
Branch office: One Canada Square, London E14 5AL Authorised and regulated in the UK by the Financial Services Authority. BNY Mellon Fund Services (Ireland) Limited is regulated by the Central Bank of Ireland.