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irishfunds.ie

10 April 2018

Irish Funds Madrid Seminar 2018

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Hosted by

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Supported by

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Ms Síle Maguire

Ambassador of Ireland to Spain

Welcome Address

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Kieran Fox

Irish Funds

Irish Funds – An Introduction

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Irish Funds Industry Overview

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A Global Funds Centre…

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For Global Distribution

irishfunds.ie10

Total Assets under Administration

- split between Irish domiciled & Non-Irish funds

Source: Central Bank of Ireland December 2017

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Irish Domiciled Assets

• UCITS represent 75% of

Irish Domiciled Assets

• 88 UCITS Man Cos

• 161 AIFMs Registered or

Authorised

• 642 AIFMs operating in Ireland on

cross border basis

• 410 ICAVs established

(since 18 March 2015)

Source: Central Bank of Ireland

2018

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Growth of Largest European Fund Domiciles

Source: EFAMA Statistics

0%

20%

40%

60%

80%

100%

120%

140%

2011 2012 2013 2014 2015 2016 2017

% G

row

th

2011 2012 2013 2014 2015 2016 2017

Europe 0% 13% 23% 42% 58% 78% 97%

Luxembourg 0% 14% 25% 48% 67% 77% 98%

Ireland 0% 16% 27% 57% 80% 98% 126%

France 0% 9% 10% 14% 21% 29% 37%

Germany 0% 13% 24% 40% 53% 66% 80%

UK 0% 17% 35% 59% 79% 77% 99%

Europe Luxembourg Ireland France Germany UK

1313 irishfunds.ie

Net Sales into Irish Domiciled Funds

Source: Central Bank of Ireland 2018

• > 30% of net sales

into all European

funds in 2017

irishfunds.ie

Other Developments….

• Updating of Ireland’s Investment Limited Partnership Legislation

• Legislative amendments approved by Irish Government.

• Entering legislative process

• Will provide additional scope for private equity and real asset funds.

• European Commission ESAs Proposals

• While there are aspects to the European Supervisory Authorities (ESAs) proposals we welcome, there are a number of

areas which are of significant concern. We have shared our views in Ireland and in Europe.

• Strong advocates of delegation to globally based experts.

• Loan Origination

• New enhancements have been made to the L-QIAIF.

• Tax Transparency

• OECD has awarded Ireland the highest international rating on tax transparency and exchange of information.

• EU Cross Border Distribution

• Consultation on removing barriers to Cross Border Distribution submitted 2016 and follow-up questionnaire completed

2017.

• We have subsequently met with the European Commission.

• Expected Q1 2018

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Other Developments….

• Pan European Personal Pension Plan (PEPP)

• Industry white paper published on PEPP.

• We have subsequently met with the European Commission.

• Financial Action Task Force (FATF) Mutual Evaluation Report (MER) of Ireland

• FATF’s assessment of Irelands anti-money laundering and counter terrorist financing concluded that “Ireland has a

sound and substantially effective regime to tackle money laundering and terrorist financing….” In addition the

Report highlights “National coordination mechanisms… and the Private Sector Consultative Forum (PSCF) were

fruitful in broadening the understanding of its ML and TF risks across all relevant agencies and with the private

sector.”

• CBI engagement re Exchange Traded Funds (ETF)

• Responded to Central Bank of Ireland (CBI) ETF discussion paper and engaged with the CBI throughout the

process.

• Consultation paper on CIS Liquidity Risk Management

• Response provided to the International Organization of Securities Commission (IOSCO) Consultation paper.

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Conclusion

• EU Member & Strategically Positioned

+

• International Hub for Globally Distributed Investment Funds

+

• Unrivalled Experience and Expertise in the Widest Range of Fund Structures

Moderator:

Panellists:

irishfunds.ie

Panel Discussion: Why Ireland? Your

European Hub

Sarah Murphy, PwC

Brendan Hayes, ICR

David Stocks, Omega

Jennifer Fox, Dillon Eustace

Juan Prieto, Corporance Asesores De Voto

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Ken Owens, PwC

Update on Brexit

1919 irishfunds.ie

Brexit: three interdependent themes

Distribution

Management

Models

(‘Delegation’)

Growth

OVER 2,400 IRISH

FUNDS SOLD TO UK

INVESTORS

$636bn

IN IRISH FUND ASSETS

MANAGED BY 175+ UK

FIRMS IN IRELAND

Continuity in UK investor

access to Irish funds

Continuity in

UK firm

management

of Irish funds

Increase Ireland’s growth

trajectory as an

international asset

management centre

SOURCE: Lipper IM Dec 2016

Monterey Ireland Fund Report 2017

Current context Target outcome

2020 irishfunds.ie

Brexit Timeline

Possible Transition Period

Indicative Deadline

for SMIC &

Delegating Super

ManCo Authorisation

August 2018Indicative Deadline

for MiFID & ManCo

with Add On

Authorisation

June 2018

2121 irishfunds.ie

International asset management centre

Growth

‘The Basics’

•Predictability / efficiency of regulatory process

•12.5% corporate tax rate

•Common law system

•Only English-speaking country in the Eurozone

•Less expensive than Zurich, Paris & Luxembourg1

Asset Manager Activity

Infra-structure

Re-affirmation of Ireland’s attractiveness as

an international asset management centreOpportunity

Benefits

SolutionProvide managers with options to support the

establishment of a physical presence in Ireland

NOTES:

1. Source PwC

2. http://www.iaim.ie/why-ireland (STEM = Science, Technology, Engineering &

Mathematics) & http://www.hea.ie/sites/default/files/awards_-

_all_undergraduate_by_level_and_field.xlsx

3. IFS 2020 Action Plan 2017 (http://finance.gov.ie) & IDA Ireland

4. MiFID firms, UCITS ManCos, Irish AIFMs & Non-Irish AIFMs - CBI

• Space for 100K new employees by 2020, 100K new houses3

• Leading global tech centre & fintech location

• London-Dublin: Most flight options in Europe

• 35K+ employed in international financial services in Ireland, 16K in funds industry

• 130K degree-level graduates across business, law and STEM w/ 20K new grads p.a.2

• 800+ investment firms active in Ireland4

• Increased presence of front office activities

• 18 of the top 20 global AMs have Irish funds

• €4trn total AuA, €300bn managed from Ireland2

• AM counterparties already in transit from UK

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Brexit: key points to pursue

• Encourage UK Treasury & FCA to recognise

Irish funds as eligible investments for UK

investors post-Brexit

• Encourage ESMA to negotiate a co-operation

agreement with the FCA as a 3rd country

regulator under AIFMD, with subsequent

signing by CBI.

• Encourage the Irish Government to support

growth in employment, diversifying skill sets

and infrastructure to assist businesses

relocating to Ireland due to Brexit.

Distribution

Management Models

Growth “Our three key

themes are

interdependent.”

DistributionManagement

Models(‘Delegation’)

Growth

2323 irishfunds.ie

Structuring options: Management models

DEFINITIONS:

• ‘MiFID Firm’: Investment firms authorised under Markets in Financial Instruments Directive (2007, to be replaced by MiFID 2 / MiFIR in January 2018)

• ‘Super ManCo’: authorised to provide services to UCITS and AIFs w/ the option of add-on authorisations for segregated mandates

• ‘SMIC’: Self-Managed Investment Company

MiFID Firm

Super ManCo w/ Add-on Authorisations (‘v2’)

Super ManCo w/ Delegates (‘v1)

SMIC• Simple option for single umbrella fund

• ‘v1’: widely used standard model w/ delegation option

• ‘v2’: ‘add-ons’ enable management w/out MiFID manager as delegate, including mandates

• Wider range of permissions availableGlobal

Asset

Managers

Regional

Asset

Managers

Multiple Asset

Manager types

Management

Models (‘Delegation’)

irishfunds.ie

Current developments

• Areas where further negotiations are required include geographical indications of various

goods, Data Protection and the automatic recognition of judgements.

• Two significant areas of divergence exist: (1) the governance of the Withdrawal

Agreement; and (2) Northern Ireland border issue.

• Negotiations will continue on the Future Relationship between the EU and the UK.

• The EU negotiating guidelines have been updated with new text which suggests the EU

will aim to conduct future financial services trade based on reviewed and improved

equivalence mechanisms.

• Nothing is agreed until everything is agreed.

• 28 March: UK regulators have provided some welcome clarity on what this means for

European Economic Area (EEA) firms passporting into the UK.

• EU regulators have made no announcements about any relief afforded by the transition

agreement for firms looking to move activity to the EU, however.

• This difference in approach is expected to continue, pending political progress in the

negotiations about the likely future state arrangements

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CBI enhances its Authorisation Processes

• The Central Bank has now concluded a comprehensive review of the way it deals with the issues

covered by the three ESMA Opinions.

• During the review, the Central Bank identified process enhancements, related to the authorisation of

investment fund managers authorised under the UCITS Directive and AIFMD and investment firms

authorised under MiFID. The application forms for UCITS Management Companies, UCITS Self-

Managed Investment Companies, Alternative Investment Fund Managers (AIFMs) and MiFID Firms

will be updated to incorporate the following requirements:

Details and rationale for the geographical distribution of planned activities.

Objective justification for delegation arrangements in relation to critical functions.

Details of due-diligence undertaken during selection process.

Information on Business Continuity arrangements.

Information on how Legal Risk is assessed.

Details on Delegate Remuneration Requirements.

Details on how Best Execution obligations continue to be met when dealing with execution venues

outside of the EU.

• In the interim until the relevant application forms have been updated, the items listed above will be

incorporated as part of the Central Bank’s authorisation process.

2626 irishfunds.ie

Structuring options: detail

Self Managed Investment

Company (SMIC)

Super ManCo w/

Delegates (‘v1’)

Super ManCo w/ Add-on

Authorisations (‘v2’)

MiFID Firm

Authorisation indicative

timeline

Allow 6 to 8 months during high

volume periods

Allow 6 to 8 months during

high volume periods

Allow 8 to 9 months during high

volume periods

Allow 9 to 10 months during

high volume periods

Activities (PM = portfolio

management, RM = risk management)

Retain oversight of PM & RM but

delegate day to day activities

Retain oversight of PM &

RM but delegate day to day

activities

Performs day-to-day PM & RM Full range of services

Manage other fund umbrellas? No Yes Yes Yes

Manage/advise Segregated

Mandates?

No No Yes, via add-on licenses without need

for MiFID delegate

Yes

Substance requirements • 2 Irish-resident directors

• 2-3 Designated Persons1

• 2-3 Irish-resident

directors1

• 2-3 Designated

Persons1&2

• 2-3 Irish-resident directors

• 2-3 Designated Persons1

• Chief Investment Officer / Managing

Director

• Head of Risk/Compliance and

Finance, internal audit.2

• Substantive presence

required in Ireland3

• Specific roles based in

Ireland2:

• Legal & compliance

• Financial control

• Risk Management

Delegation / Outsourcing CBI permits delegation of day-

to-day PM and/or RM activities

CBI permits delegation of

day-to-day PM and/or RM

activities

CBI permits delegation of day-to-day

PM and/or RM activities

Outsourcing allowed (including

to other EEA states or 3rd

countries) if in line with

applicable law and best practice

1. Designated persons not all required to be Irish resident and can be directors or employees of the Investment Manager. For ‘low’ PRISM rated firms, half of the directors and at least 2 Designated Persons performing half of the

managerial functions are required to be EEA-resident. For ‘medium’ PRISM rating firms, 3 directors or 2 directors plus 1 designated person should be Irish resident.

2. The need for specific roles may differ on a case-by-case basis, depending on complexity and number of branches.

3. ‘Substantive presence’ for MiFID: the firm’s board and management run the firm from Ireland and make decisions in Ireland with sufficient staff and resources to manage the risks.

2727 irishfunds.ie

SMIC Super ManCo w/ Delegates (‘v1’) Super ManCo w/ Add-on Authorisations

(‘v2’)

MiFID Firm

Capital

Required

€300,000 initial capital (which

can be met using shareholder

funds)

One quarter of its total expenditure in

its most recent annual accounts and

€125,000 plus an additional amount

of up to 0.02% of any AUM

exceeding €250m whichever is

greater, subject to a maximum

amount of €10million

One quarter of its total expenditure in its

most recent annual accounts and

€125,000 plus an additional amount of up

to 0.02% of any AUM exceeding €250m

whichever is greater, subject to a

maximum amount of €10million

Will be calculated in accordance with

CRD IV / CRR requirements

Pros • Works well if no other funds

managed

• Less staff on the ground

• Can manage multiple fund

umbrellas

• Can passport to other EEA

jurisdictions

• Less staff on the ground than v2 or

MiFID option

• Can perform full PM activities or

delegate

• Can manage multiple fund umbrellas &

mandates

• Can passport to other EEA jurisdictions

• Less staff on the ground than MiFID

option

• Wide range of

permissions/potential business

lines available

• Can passport throughout EEA

without seeking additional

authorisations

Cons • Cannot perform all PM

activities

• Cannot manage or advise

mandates

• Must delegate to regulated

investment manager

• Cannot perform all PM activities

• Cannot manage mandates

• More staff on the ground than SMIC or

v1 option

• Add-on authorisations possible, which

may be subject to local review when

passporting to other EEA jurisdictions

• More staff on the ground

• Subject to CRD IV / CRR

requirements

• MiFID 2 changes in Jan-2018

Structuring options: pros & cons

Moderator:

Panellists:

irishfunds.ie

Panel Discussion: Alternatives and

opportunities in this area

Jorge Revilla, KPMG

Laura Gonzáles, Allfunds Bank

Des Fullam, Carne

José María Amusategui, Cygnus Asset Management

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Patrick Atkinson, PwC

Closing Remarks

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Annual Global Funds Conference 2018

Now in its 20th year, the Irish Funds

Annual Global Funds Conference is a

highlight of the international funds industry

calendar.

The conference brings together prominent

industry speakers to discuss current

issues and challenges facing the global

funds industry.

For further information on registration,

sponsorship and exhibition please visit

irishfunds.ie/conference2018.

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Hosted by

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Supported by