Multiple lures

Kieran Donoghue, head of international financial services, corporate strategy and public policy at IDA Ireland, the official agency for encouraging inward investment in Ireland, discussed a number of topics, including Ireland’s appeal for Asian managers and Brexit, with Asia Asset Management (AAM) in a recent interview. Here are some excerpts.

AAM: What areas of financial services does Ireland excel in?

Kieran Donoghue: The jurisdiction has had a recognised financial centre in Dublin for about 30 years going back to the late 1980s. Some of the companies established here over that timeframe include Citibank, which now run their European headquarters out of Dublin, so they manage their pan-European transaction banking network from Dublin. Barclays set up their post-Brexit European headquarters here as well. Bank of America Merrill Lynch have done the same thing.

Within the asset servicing fund administration space we have companies like State Street, the largest custodian in the world, Bank of New York Mellon, Northern Trust, and several other firms. The world’s largest asset manager, BlackRock, has a substantial presence here; its European funds platform is effectively operated from Dublin.

In the insurance space, we have Aviva, Legal & General, MetLife. Zurich run their pan-European life insurance business out of Dublin. In the aircraft leasing space, we have Air Cap, Avalon, GCAS, Airbus, all of the leading lessors. Aircraft leasing financing is one of the spaces that has been particularly attractive to Asia. A lot of Chinese groups – Bank of China, ICBC, China Development Bank, China Construction Bank, Agricultural Bank of China – all set up aircraft leasing and financing platforms in Dublin.

In the financial technology space, we have a range of big and small firms, with some of our established clients, like Fidelity, MetLife, Citigroup and others, developing their financial technology training or banking platforms in Dublin. One of the reasons for that is that there are more than 500 international software companies in the jurisdiction, so the finance and technology sectors exist side by side. Given the convergence between the two sectors, a lot of financial services firms have found Dublin an attractive place to partner with technology companies and also source technology talent.

AAM: Which areas of financial services in Ireland are most attractive to international participants?

Donoghue: In terms of why [these companies are] here, the predominant reason is market access to the EU [European Union]. The EU regulatory passport allows them to distribute products and provide services from here to all the other EU markets. There [are] capital, regulatory, administrative and cost efficiencies associated with that model.

They’re here also because we have a significant number of people who work here and understand the industries. There is a cost arbitrage opportunity versus the leading financial centres like London or Frankfurt. Some of the groups are reporting a 30%-40% cost saving on a fully loaded basis compared to London.

In a post-Brexit scenario, there’s been a significant uplift in the volume of business as groups look to carve out the EU-facing piece of their UK-based business and move to an alternative domicile. We’ve captured some incremental investment as a consequence of the Brexit process. We have no expectation that London is going to disappear as a major financial centre in its own right, and that’s good for the industry, both in a European and a global context. The industry is moving to a more decentralised location model compared to the hub-and-spoke model that we’ve had for many years.

Reasons for looking at Ireland vary. For the Chinese groups, it’s the desire to acquire deep domain knowledge in an area they want to develop expertise in or capture market share. Another reason why Asian groups are here is that they’re following their clients into Europe. As their manufacturing or services clients back home internationalise into European geographies, they want to follow them in to continue to provide financial services to them, and Ireland is an attractive base.

We have seen some interest from Asian groups with relation to investment funds. When people look at Ireland, they see it as a leading fund centre, a leading centre for financial technology, aircraft leasing and financing, pan-European life insurance. They’re now seeing more activity in the pan-European banking space courtesy of those post-Brexit expansions. We would be viewed as a fund centre.

Any Asian groups that are looking for a distribution platform for their investment funds and pension products into the European geographies would use Ireland. We’re noted for UCITS [Undertakings for the Collective Investment in Transferable Securities] and also alternatives, and specialist alternatives structures related to private equity and real estate.

We recognise that Ireland is a faraway place for a lot of Asian managers. But we view this as a long-term strategic play. As the Asian middle class grows significantly, and they want to deploy capital overseas, or capture investment opportunities, or diversify portfolios, and are looking for a safe, secure, well-regulated jurisdiction from which to do that, we think Ireland will appeal in that context.