2021 was a year of reflection and recovery across the Asset Management industry. In Ireland, total assets in Irish domiciled funds reached a record high of €3.9tn; Ireland became the EU’s largest ETF hub and we retained our position as one of the world’s foremost alternative funds servicing jurisdictions.
Time and time again, when asked “Why Ireland?”, clients tell us that it’s because of our service culture; the way we co-develop solutions with clients; together with our drive towards innovation that sets us apart. With building blocks as firm as these, we can continue to grow and to become a Global Centre of Excellence for asset management.
ESG and sustainable investment
Our industry is embracing ESG. This is the right thing to do and gives the industry a strong purpose to rally around.
Robust ESG policies will allow for capital to be allocated through a longer-term lens. Long-term capital is important for small to mid-sized investee companies as it allows them the time to grow sustainably. Additionally, asset managers can look towards providing alternative sources of finance for infrastructure projects such as schools; hospitals and roads, which in turn energise and sustain our communities. Thinking over a longer-term time horizon also aligns more closely with the needs of regular savers and pension funds.
Inevitably, the shift to ESG will create tension during the early years, on returns most definitely and when it comes to reporting we may question ourselves on whether the data points, choices taken or indeed the taxonomies themselves are correct. It won’t always be easy, but a clear purpose, which involves us doing the right thing can’t be all bad!
Private Equity and private credit
I have no doubt that private equity and private credit will play a significant role in driving economic growth in Ireland. For the real economy, private capital is a key source of funding for private companies, allowing for the creation of jobs, the generation of returns for investors and building better businesses.
Logically, the asset management ecosystem in Ireland, which includes our world-class ability to service complex asset classes lends itself to service the needs of International Asset Managers as they look to deploy this capital across the world. In Ireland, with the advent of the Investment Limited Partnership, the Government and regulatory agendas are aligning to ensure we are a destination of choice as the growth in these asset classes continues.
Distribution and democratisation of investing
Digital distribution models for asset management companies have evolved significantly over the course of the pandemic. We know the disrupters are coming, some are already here. Client acquisition in the future may be as strongly linked to the investors’ user experience, as it was in the past to brand.
With the responsibility for long term savings having shifted from corporates to individuals, significant work and education 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. Our Government should work to create more demand-side incentives making it easier and attractive for individuals participate in the wider market.
What lies ahead is in the hands of the industry
Much has been done to transform and disrupt financial services over the past ten years.
The pandemic has proven to be a catalyst for change. Technology platforms afforded us a lifeline to function over the past two years and our everyday familiarity and discernment of technology now highlights how important digital is and how much more there is to do when it comes to refining the digital user experience.
The pandemic has taught us much about strong values and purpose. Environmental, Social and Governance Policies are no longer opportunities to differentiate our business, rather they are required to simply exist.
Finally, the pandemic has highlighted that ours is an industry that is not heavily dependent on capital or real estate and is highly mobile. Our industry is our people, who serve global savers. To continue to attract the best people into our industry, I believe that rallying around a strong purpose, grounded in ESG, will make the industry incredibly exciting for the next generation of asset management professionals.
