The regulatory environment and availability of the necessary talent are among the biggest factors influencing future growth of the funds and asset management industry here, a new study has found.
82% of firms surveyed said the domestic regulatory environment was among the top five factors impacting the expansion of the sector over the next five years.
73% also cited the availability of necessary talent as being the most important issue.
EU policy and the legislative environment were referenced by more than two thirds, with labour costs mentioned by 64%.
The research was carried out as part of a wider report by Indecon on behalf of Irish Funds, the industry association for the sector here, which examined its economic contribution.
It found that by the end of last year, total assets managed and serviced here had reached €5.7 trillion, with 13,942 domiciled and non-domiciled funds under administration in Ireland, up 28.4% since 2008.
It also found there are now 37,500 full-time equivalents working in the industry, with 19,519 of those employed directly.
That figure has risen 22% over the last five years, with 200 different firms now employing people here across various types of services.
The sector has also become more regionalised, with nearly half of those employed in it now located outside the capital, up from 38% in 2020.
The research also found that the sector contributes nearly €1bn in direct taxes to the exchequer and generates €11.45bn in revenue and €15.4bn in Gross Value Added to the economy.
The spend on labour hit €2 billion last year, it claims, with investment and asset managers accounting for 30% that and fund administration and legal services also central.
Indecon also concluded that industry-Government collaboration will be required if further growth is to take place in the funds and asset management business here and to ensure Ireland remains a competitive leader in global financial markets.
In particular it highlights the area of private markets investing as one where it says potential for expansion lies, if the right environment is there.
To achieve this, the report says there must be minor changes made to Ireland’s legal and regulatory framework.
“By meeting the needs of investors and savers from around the world Ireland’s funds and asset management industry has demonstrated strong growth, benefitting every part of the country,” said Pat Lardner, Chief Executive of Irish Funds.
“But we operate in a fast moving, innovative and competitive environment.”
“By working together with the government and taking proactive steps, Ireland can continue to build on its status as a global leader.”
Speaking on RTÉ’s Morning Ireland Mr Lardner said that changes to how the sector is regulated should be made to allow it remain “agile, to meet the changing needs of investors, being effective in terms of allowing them (investors) access and then efficient in terms of reducing costs.
“One of the key factors in our growth is the fact the industry is regulated … it’s how that’s implemented and making sure we’re keeping pace with investor needs.”
Regarding potential changes in regulation, Mr Lardner pointed to the area of private market investing in particular, because “there’s a huge demand from investors all over the world to provide for age care, for their pension provision and they’re looking to do this through lots of different assets”.
The Irish Funds head also said it’s important to make sure “the range of services and solutions being provided is widening and broadening” to mitigate any potential shocks to the funds sector.
He said: “If you have variability or volatility in the international economy, that impacts savers.
“Our job is to make sure by allowing people to diversify, by allowing them to invest in lots of different types of assets that they can weather those storms.
“This industry has been here for over 35 years, we have seen pretty much every major economic condition you can throw at it, and we’re still here and still growing.”
The report highlights the need for environmental, social and governance frameworks to be put in place in order to satisfy investors.
It also refers to the requirement for AI, machine learning and big data to be embraced here, if Ireland is to remain competitive in the sector.
In recent times the Central Bank has been working to improve the regulation and resilience of non-bank financial intermediaries or the shadow banking sector here.
In late 2022 the regulator decided to introduce a plan to limit borrowings of property funds to 60% of the value of underlying assets, but gave pre-existing funds five years to comply.
Earlier this year it also moved with authorities in Luxembourg to boost the resilience of a form of UK fund that faced difficulties two years ago, following a tax giveaway budget announced by the British government under Liz Truss.