| Dublin's listing business - powering ahead |
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| MAIRE O'CONNOR was one of the key architects of Ireland's funds listing industry at its inception in the 1980s. She looks back on an incredible 15 years for the Irish Stock Exchange's listing business, which has seen the creation of two new businesses - in investment funds and debt securities - both of which have seen exponential growth since their establishment. |
The listing of the first investment fund on the Irish Stock Exchange in 1989 was such an important event that the cameras were out (Thankfully, none of the photos can be found!). The fund was the AIG American Equity Trust and it was also the first UCITS established in Ireland. Believe it or not, the listing of the first non-Irish fund, in the same year, was even more difficult.
Little did either Gerardine Jones (then head of listing at the Irish Stock Exchange) or myself know what would come of it all. In once sense, we had a blank sheet of paper - this had never been done before. In another, we had an almost impossible task - to fit a fund into what was then the Yellow Book, i.e. the London Stock Exchange rules (the Irish Stock Exchange was, until 1995, part of the London Stock Exchange). The London rules, to the extent that they catered for investment funds at all, were geared towards UK investment trusts and UK authorised unit trusts. UCITS, at that time, were virtually unheard of.
All involved had to learn - and learn fast - that an investment fund was a different 'animal' to an ordinary trading company, that the listing for a fund was usually required for technical reasons and that stock exchange trading in a fund rarely takes place.
Thanks largely to the pragmatic and commercial approach adopted by the Irish Stock Exchange, particularly Tom Healy, general manager, and Gerardine Jones, the listing of funds on the Irish Stock Exchange quickly became one of the selling points of the IFSC. But the listing business took on a life of its own and, having been involved in marketing listings from the very beginning, I have to admit that, for the most part, we were pushing an open door, particularly in the U.S. and Hong Kong. Fund promoters needed a stock exchange listing to sell to European institutions and had, up to then, been dealing with Luxembourg where their experience, to say the least, had not been great.
In 1995, the French COB (Commission des Operations de Bourse) decided to enforce an existing rule whereby French funds of funds were only permitted to invest in unregulated funds if the underlying fund was listed on a recognized stock exchange. The COB gave existing French funds of funds only a few months to comply with the requirement and I remember well that the long hot summer of 1995 was something of a nightmare, with a huge number of funds, particularly U.S.-managed Cayman funds, needing a listing in a hurry to avoid their French fund of funds investors from redeeming out of their fund.
Although my firm at the time, NCB, was the first to see the opportunity in listing funds, the other stockbroking firms gradually followed. When I left NCB in 1996, to set up the Dublin office of Robson Rhodes, we became the first Irish accounting firm to be an approved listing sponsor. Since then, in addition to my current firm, Ernst & Young, a number of law firms have also been approved. But, whilst competition has undoubtedly increased, the size of the 'pie' has also increased considerably, particularly with the development of the European hedge fund industry. Offshore hedge funds, particularly Cayman Islands funds, now make up a significant portion of the funds listed on the Irish Stock Exchange. (About one third of the funds listed in Dublin are Cayman funds.)
Special rules for listing investment funds were quickly developed by the Exchange. These were formally codified in 1996. A full-scale review of the Code is currently underway at the Exchange.
And then the listing of asset-backed securities (ABS) took off! In 1997, when I was still at Robson Rhodes, one of my colleagues, Oliver O'Connor (now special adviser to the Tanaiste), received a phone call from a US lawyer contact asking if it was possible to list a CDO on the Irish Stock Exchange. The lawyer explained that they were having difficulties achieving the listing on the Luxembourg Stock Exchange and, given their good experience with listing investment funds in Dublin, wanted to see whether they could list the CDO in Dublin also. To be very honest, we simply did not know the answer. We contacted the Exchange, however, and asked if they would review the documentation, on an informal basis, to see if it could be done. And we did it!
The client withdrew the application from the Luxembourg Stock Exchange and the transaction was listed in Dublin. Soon afterwards, the Irish Exchange drew up special rules for listing asset-backed securities and, with something of a feeling of deja vu, off we went marketing again. Once again, we were pushing an open door to some extent because of the frustrations and delays which were being experienced with other Exchanges.
The listing of asset backed securities (ABS) on the Irish Stock Exchange has now become a significant business. There are over 1,000 ABS listed on the Irish Exchange, and the Irish Exchange is now generally accepted as the Exchange of choice for such listings.
Whilst the bulk of the ABS listings to date have been for non-Irish issuers, the recent changes in Irish tax legislation should mean that, increasingly, securitisation transactions will use Irish SPVs.
Seeing the success of the funds and ABS listing business, little do people know how close we came to giving up in frustration in those early days. Thankfully we did not. I, personally, have enjoyed the last fourteen years and the development of this business has, hopefully, contributed in some small way to the development of the IFSC and perhaps even to that soon to be extinct animal, the Celtic Tiger! |
Maire O'Connor is a partner in investment funds in Ernst & Young.
This article was published in June 2003.
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