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Thursday, 25th April 2024 |
| Irish fund managers anticipate IEP300bn industry within five years |
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| Speaking recently at the Dublin Funds Industry Association conference, Kevin Murphy, currently Chairman of the Irish Association of Investment Managers, outlined his view of how members of the IAIM would manage IEP300bn within 5 years. |
The three growth drivers will be as follows: (i) The strong growth in the Irish economy leading to a rapid increase in both retail and pension funds in Ireland. (ii) The growing success of Irish fund managers in obtaining overseas mandates for managing assets. (iii) The success of the IFSC in encouraging overseas companies to locate their fund management companies in Ireland.
Last year assets managed on behalf of Irish residents grew by 20% from IEP47bn. in 1998 to IEP58bn. in 1999. Growth in assets invested on behalf of international clients increased by 70% in 1999 to IEP84bn. from IEP50bn. in 1998.
Within Ireland the major growth markets are split amongst:
• The savings and investments market: IEP15bn.
• The defined contribution market: IEP13bn.
• The defined benefit market: IEP30bn.
The savings market is currently a high growth market today driven by the new wealth being created in Ireland today. A further factor has been the fall in interest rates which has driven the demand for alternative investments particularly for equity based products. The Irish fund managers are not going to have their own way with competition from overseas internet based players. These players are both the global mutual fund players and also e-trading operations which will offer Irish investors an opportunity to build their own direct portfolio. However, the Irish managers are strongly positioned with their well established brand names and their access to local distribution particularly insurance brokers and bank branches.
Personal savings
The defined contribution market is one of the most rapidly growing markets in Ireland. This is being helped by the rapid influx of US multi-nationals into Ireland over the last few years. Many of these imported benefit practices into Ireland such as the 401k. model which essentially replicates the defined contribution market in Ireland. Even more growth is expected to come in the future with the advent of the National Pensions Initiative. This initiative is proposing a new simplified Personal Retirement Savings Account (PRSA) contract which will offer a very simple low cost way of saving for your pension. The Irish fund managers are well positioned for this and will be the predominant gainer of funds from this initiative. There are great opportunities here given the high employment growth in Ireland, the high salary growth and the expected PRSA initiative.
Defined benefit pensions
The final market which still represents the largest market for the institutional players in Ireland is the defined benefit market. Here the future is more mixed as the global players are likely to have a bigger influence in this area. If you look around the world at the defined benefit markets, increasingly there is a trend towards the core satellite method of fund structure. Under this method of fund management the core money is typically managed on a low risk basis with the balance being managed via specialist mandates. However with their global equity skill the Irish fund managers are very strongly positioned to see off many of the overseas players and should be well positioned to defend their current success in this area.
A recent survey outlined the strength of the fund management industry in Ireland. This survey showed that Irish fund managers topped an international league table for pension fund performance over 14 years to 1998 with the real return on pension fund investment of 12.54% per annum.
These excellent investment returns demonstrate that the expertise and quality of Irish investment managers are second to none. Irish investment managers are well placed to continue with this success in continuing to service pension schemes in Ireland.
Exporting skills
An additional activity in Ireland is to export the skill behind these returns. Strong growth has been achieved in this area. This has predominantly been achieved in the global equity market both in the UK and the US.
Finally, the existence of a very long and successful history in equity fund management has encouraged some overseas fund managers to locate their operation in Ireland. The biggest of these is of course Europlus which has located its international asset management arm in the IFSC. The location of this reflects the increasingly robust reputation Dublin has as international centre for global fund management.
In summary then with a very strong local business and increasing strength in exporting and the willingness of overseas players to locate here, the outlook for Irish based fund managers is looking increasingly stronger and stronger as we head into the new millennium. |
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| Article appeared in the July 2000 issue.
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