| Record achievements in Ireland's fund service industry set the stage for future growth |
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| Gavin Nangle traces the development of Ireland as a premier global funds servicing jurisdiction, examines the role State Street has played in this growth, and casts his eye over possible future trends. |
The astonishing record of Ireland's burgeoning economy since the 1990s tells an impressive tale. To observers and participants alike, this oft-told and familiar story is a tribute to vision, agility and hard work. Over the past decade Ireland's Celtic Tiger has experienced average annual growth of six per cent per annum. Such growth has dramatically transformed the Irish landscape, and reflected far-sighted public policy and considerable - private initiative. Within this larger story, remarkable successes abound, not least the funds services industry in Ireland, a major component of the services sector that itself comprises a robust 49 per cent of GDP. | | Gavin Nangle |
Ireland's community of financial services providers traces its roots to the enabling legislation of 1989 that effectively laid the foundation for the industry that exists today. Since that time the industry has moved rapidly and 9,000 people are currently employed directly in the servicing of mutual funds. In terms of both personnel and presence, the financial services industry in Ireland has become a leading symbol of the country's economic renaissance, developing hand in hand with the phenomenal growth of the national economy itself.
As the world's leading provider of financial services to institutional investors, State Street Corporation saw Ireland's potential early on. It established its first footprint in the market through an alliance with the Bank of Ireland, linking State Street's global brand and leading-edge technology with Ireland's best-known retailing banking presence. Since then, State Street (Ireland) has become Ireland's largest fund service provider measured in terms of assets under custody or administration (more than $230 billion as at March 31, 2007). It now counts over 480 fund structures within its purview, and is the employer of choice for its team of approximately 1,500 highly trained employees. Its story in Ireland offers a fitting parallel to that of the industry itself in terms of the speed of growth, scale and sophistication of services provided.
High-end expertise in a talented labour market
For the fund servicing industry, Ireland's advantages have offered extraordinary opportunities, not least a welcoming regulatory environment and a well educated, highly skilled workforce. Where once graduates might have been compelled to leave Ireland to join financial firms in London or New York, instead, they have been able to help build a highly successful career and fund servicing industry initially in Dublin and increasingly in regions throughout Ireland.
Ireland's excellent education system consistently produced highly qualified and motivated graduates from which to draw. This high quality of staff has allowed the industry to deliver quality service to increasingly complex financial instruments and to accelerate, a prime attribute of the industry in Ireland and a magnet for new business. Indeed, that over one third of the world's alternative investment funds - including hedge funds - are now serviced in Ireland demonstrates the industry's product and service expertise. Where to service these funds is entirely a decision of choice that, increasingly, is Ireland, driven by the quality of service that investment managers receive - and have now come to expect - in Ireland.
In fact, the Irish investment services industry has earned a reputation for its keen and agile solutions to the complex demands and requirements of the global financial industry. When, for example, some years ago a particular type of investment vehicle in another jurisdiction appeared uniquely positioned to capture the market in the pooling of pension assets, Ireland's industry was determined to respond effectively to meet a pressing business imperative. State Street and the investment services sector - accountants, tax advisers, administrators, regulators and custodians - worked together to meet the challenge in short order. The result was legislation enacting the existence of the Common Contractual Fund (CCF) and State Street (Ireland) serviced the first such fund launched in the Irish market.
Agility for the future
This spirit of cooperation that helps define the working relationship between the financial industry in general and Ireland-based administrators and custodians continues to benefit new product and service offerings. Sophisticated investment strategies dependent on cutting-edge derivative instruments, for example, continually challenge service providers everywhere. It is a test that Ireland's industry has consistently proven itself adept at meeting with valuation, accounting and pricing models capable of supporting even the most complex investment products. State Street (Ireland) has long recognised the importance of finding servicing solutions to complex investment challenges. Through its sister company, International Fund Services, it applies its unique expertise to servicing the alternative investment funds space.
The achievements of Ireland's fund service industry have earned it durable working relationships with leading investment managers around the globe. These relationships, and the strengths that have historically driven Ireland's fund services industry, continue to fuel its remarkable growth. With over $1.2 trillion in assets under administration, it has seen more than a 200 per cent increase since 2001, momentum that promises to keep it well-positioned for the future.
At the same time, its successes raise challenges that call upon its members to deploy their skill and expertise in new directions.
As global investment managers step up demand for the expertise of Irish service providers, pressure to meet those demands with locally sourced talent grows stiffer. Today's increasingly competitive employee environment is leading to annual turnover rates across many fund service providers that exceed 20 per cent.
To cope with tightening workforce needs, regulations that previously restricted fund services operations to Dublin have been loosened to allow companies to operate elsewhere in Ireland, augmenting the employment base as well as enhancing options for creating suitable office space. State Street (Ireland) was the first firm to move beyond Dublin's economic orbit, establishing a presence in Kilkenny where it now employs 300 people. Indeed, its commitment to high-quality staffing has prompted it to stay ahead of the tightening labour pool by looking even further afield, recruiting personnel into Ireland from jurisdictions abroad, such as Poland, adding new diversity and talent to its team. The key challenge for the industry as a whole is how to maintain growth and increase efficiency to sustain the industry's competitiveness in Ireland.
In the face of its record achievements, Ireland's fund services community is well-positioned to look to the future. At the same time, the ever-changing needs and conditions of the global financial industry reward agility, readiness and investment in quality staff, systems and products. These happen to be precisely the strengths Ireland offers today. State Street is proud to be a part of the story, and with the members of the investment services industry looks forward to meeting the challenges that await. |
Gavin Nangle is head of business development with State Street International.
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| Article appeared in the July 2007 issue.
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