Ireland should look to build on very firm foundations and commit as a global centre of excellence for asset management. Our ability to do so, will be inextricably linked with our ability to compete against other countries competing for the same level of jobs and services. The industry in Ireland therefore needs to continually grow its capacity, advance its knowledge base and diversify its skill sets to attract and meet international attention that may otherwise look elsewhere.
In building our industry, we cannot lose sight of some real threats that might challenge and hamper growth, including:
- The emergence of alternative jurisdictions, such as the UK;
- The ease of working remotely in an industry that is not heavily dependent on capital or real estate, and is highly mobile;
- The need for investment and modernisation of third level education to deliver world class talent; and
- The suitability of Irish investment vehicles for use as global investment funds.
On top of navigating a vast EU and US regulatory agenda, the asset management industry has been working through many structural issues since the financial crisis of 2008.
“Value for money” tops the agenda. I We have witnessed investors switch from more expensive active managed funds to lower cost passive products. For active managers there are three core challenges: be distinct, perform and offer a value-based proposition. In a market as highly fragmented as asset management, it’s increasingly more difficult to be distinct. As a result, performance and operational efficiencies are key. It’s no surprise therefore that we have witnessed significant M&A activity across the entire asset management value chain, with participants consolidating for growth and economies of scale.
Size and scale will get the industry to point, but technology transformation, intelligent data analytics and digital distribution will quickly occupy board room conversations as the industry starts to truly transform itself.
Distribution and democratisation of investing
Digital distribution models for asset management companies have evolved significantly over the course of the pandemic. With the responsibility for long term savings having shifted from corporates to individuals, significant work is still needed to democratise investing and allow more and more individuals participate as investors.
In Ireland alone, we have over €130 billion in cash deposits from Irish households which will quickly lose value in an inflationary environment. The Irish government should act and begin to create demand-side incentives allowing more individuals participate in the wider market.
Sustainability in sustainable investment
The industry is embracing ESG. This is the right thing to do and holistically gives the industry a strong purpose to rally around. Strong ESG policies will ensure that capital is allocated through a more longer-term lens, this is important for companies to grow and infrastructure projects to obtain alternative funding, which in turn will sustain our communities Inevitably, switching to ESG will create tensions on returns during the early years, with ESG funds sometimes coming out in front, and sometimes behind. Patience from all sides will be necessary to stay the course in the early years, but the benefits will be worth it
Business models, processes, definitions and taxonomies will be challenging, and no doubt may change from time to time. But when it comes to climate, we have hundreds of years of erosion to pay reparations for. And if there is any doubt about that… just remember our children, and their children, and the world we leave for them.
Private Equity and private credit
There is no doubt that private equity and private credit will play a significant role in driving economic growth in Ireland. Private equity is a key source of funds for private companies and getting capital into the real economy, which in turn creates jobs, generates returns for its investors and builds better businesses.
Logically, the asset management ecosystem in Ireland lends itself to service the needs of International Asset Managers as they look to deploy this capital across the world. The Government and regulatory agendas need to align to ensure Ireland isn’t left behind as growth in these asset classes continues.