Irish Fund Industry Updates. irishfunds.ie

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2 Irish Fund Industry Updates

3 Net Assets in EUR billions Growth in AuM of the Irish Funds Industry 2008 to June ,500 2,000 UCITS AIFs , , ,044 1,275 1,447 1,579 1,831 1, Q Source: Efama, September 2018

4 Number of Funds Fund Growth Trends: Number of UCITS and AIFS 2008 to June ,000 7,000 6,000 5,000 3,097 AIFs UCITS 3,085 2,721 2,899 3,167 3,345 3,561 3,864 4,051 4,266 4,342 4,000 3,000 2,000 1,928 1,906 1,844 1,984 2,138 2,254 2,272 2,337 2,419 2,566 2,679 1, Q Source: Efama and Irish Funds September 2018

5 % Growth Ireland is the fastest growing of the 5 largest European fund domiciles June 2018 (2011 based 100) Q Europe Luxembourg Ireland France Germany UK Source: EFAMA Statistics September 2018

6 Ireland Voted Favourite Fund Domicile 80% 70% 60% 50% 71% Which European domiciles would fund managers choose if starting over? 45% 45% 40% 30% 20% 10% 33% 27% 23% 20% 14% 8% 6% 6% 0% Ireland Germany Luxembourg United Kingdom Netherlands France Sweden Spain Italy Malta Other 71% of 200 global asset managers would choose Ireland as one of their top-3 European domiciles. 73% of managers ranked Ireland as a top-3 jurisdiction in terms of its legal and tax framework for investment funds. 72% of managers ranked Ireland as a top-3 domicile as regards business conditions for domiciling funds. 67% of respondents ranked Ireland as a top-3 domicile as regards regulatory conditions. 76% of US managers rank Ireland as a top-3 domicile in terms of the best regulatory conditions for domiciling funds in Europe. The full survey report is available from

7 The Story of 2018 in the Irish Funds Industry Ireland is the second largest fund domicile in Europe at the end of June The Irish funds industry has grown strongly in 2018 so far. Ireland services more than 40% of hedge funds globally Total assets under administration 2,457 2,487 Irish funds EUR billion Non-Irish funds EUR billion Net sales bn Total Domiciled Funds YTD 2018 Net sales - Total Irish Funds 81 Sources: Central Bank of Ireland, Irish Funds September 2018

8 Irish Domiciled Funds - by Asset Class 4% 2% 19% 28% Equity Bond Alternatives Money Market Balanced Other 25% 22% Source: Irish Funds July 2018

9 Irish Funds - by Promoter Origin 8% 2% 1% 2% 26% North America UK EU-27 Switzerland Asia Other 61% Source: Monterey 30 June 2017

10 ETFs in the Irish funds industry Net Assets of UCITS ETFs by Domicile 2% 23% Ireland France Germany Luxembourg 9% Other 56% 10% Source: Irish Funds, June 2018

11 European ETF Market by domicile 2008 to June Ireland Luxembourg France Germany Others Source: Efama September 2018, PwC Analysis

12 Evolution of cross-border distribution Number of cross-border funds and registrations

13 Top 5 markets for the registration of Irish UCITS Ireland Registrations in December 2017 December 2016 % Growth United Kingdom 2,764 2, % Germany 2,643 2, % France 2,336 1, % Switzerland Netherlands 2,003 1, % 1,879 1, % Top 5 Markets 11,625 9, % Total No. of Registrations 26,928 23, % Source: PwC and Lipper, December 2017

14 Typical Fund Structures

15 UCITS or AIF

16 UCITS & AIF Regulation Harmonisation of retail investment product across the EU Regulated product - Central Bank of Ireland Automatically authorised for sale to members of public in other EU Member States Must comply with marketing and advertising regulations applicable to local UCITS funds established in those other MS (EU passport ) Primarily sold to retail investors but increasingly targeting institutional investors ETFs and MMFs are UCITS regulated funds Alternative Investment Fund Managers Directive imposes harmonised conditions and requirements on the operations of AIF managers in return for an AIF passport to market AIFs across the EU and manage AIFs domiciled in other member states other than the AIFM home state. AIF/UCITS Investment Company (plc) Unit Trust CCF ICAV ILP Most popular Denotes AIF only

17 Typical Structure: Investment Company (PLC / ICAV) Investment Company (Ireland) Owns assets of fund and appoints service providers (may be self-managed) Management Company (Optional investment company can selfmanage ) Transfer Agent (Ireland) Maintains shareholder records Distributors (any location) sells fund to investors Investment Manager (any location) makes investment decisions Auditor (Ireland) examines records for regulatory compliance Administrator (Ireland) Calculates fund NAV and prepares reports Custodian (Ireland) Safekeeping of fund assets Investors (any location) Global Sub-custodian (any location) Safekeeping of assets in other jurisdictions Investment Company PLCs: Can be either a UCITS or AIF PLC. Regulated entities set up as PLCs pursuant to Companies Act 2014 (Ireland Company Law). PLCs are often umbrella funds with multiple sub-funds which combine to give company totals. Each sub-fund has its own portfolio of investments and investors. There is segregated liability between sub-funds.

18 ICAV Key features The ICAV is an Irish regulated fund established under the ICAV Act It is a corporate vehicle and has separate legal personality. The Central Bank is both the registration and the supervisory authority of the ICAV. The ICAV is a flexible vehicle it can be open-ended, closed-ended, have limited liquidity, be a UCITS or an AIF. The ICAV can be established as an umbrella fund with various sub-funds and share classes. The ICAV has flexibility in terms of accounting standards (Irish, UK, USA, IFRS, Japanese and Canadian GAAP) and sub-fund year ends. The ICAV is administratively less burdensome - there is just one constitutional document - Instrument of incorporation (IOI) and the ICAV can dispense with requirement to hold an AGM. The ICAV can be self-managed or managed by external Management Company. The ICAV has the ability to check-the-box for US tax purposes. The ICAV is eligible to take advantage of some of the Irish treaty network, including the U.S. treaty. The ICAV has the ability to have a special carry class at ICAV level.

19 Comparison of ICAV and PLC Distinguishing features ICAV PLC Ability to check-the box for US taxation purposes O Required to have the aim of spreading investment risk O Shareholder approval required for all changes to constitutional document O May dispense with requirement to hold annual general meetings O Accounts can be drawn up at sub-fund level O Requirement to have minimum of 2 directors Filing with Companies Registrations Office O Ability to have Umbrella structure and/or Stand-alone structure UCITS / AIF compliant structure

20 Hot Topics

21 Hot Topics Brexit Regulation Talent General Data Protection Regulation ( GDPR )

22 PwC Brexit survey What is your preferred jurisdiction to relocate UK functions to post Brexit? 2.8% 5.6% 5.6% 8.3% 2.8% 2.8% Ireland 38.9% Luxembourg Netherlands Germany Malta Italy Slovakia 33.3% Not relocating 36 responses

23 Brexit Structuring Options Global Asset Managers Regional Asset Managers MiFID Firm Super ManCo w/ Add-on Authorisations ( v2 ) Super ManCo w/ Delegates ( v1) SMIC Management Models ( Delegation ) DEFINITIONS: MiFID Firm : Investment firms authorised under Markets in Financial Instruments Directive. 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

24 Panel Discussion: Trends in Fund Structures & Regulation Moderator: Michelle Lloyd, Maples & Calder Panellists: Clive Bellows, Northern Trust Andy Finch, Canaccord Maria Gabriela Bianchini, Optionality Group

25 Distributing Alternative Investment Funds: European National Private Placement Regimes

26 1. ICAV Distribution Potential: Parallel Funds

27 2. ICAV Distribution Potential: Global Master-Feeder

28 3. Limited Investment in Cayman SPC 84.9% ICAV 84.9% Cayman SPC 100% Assets

29 4. Co-Investment Option ICAV 84% Cayman SPC 16% 100% Assets

30 Comparisons of ICAV & Singapore VCC Armin Choksey, PwC

31 The Singapore Variable Capital Structure A legal entity form specifically for investment funds that can be used for traditional and alternative strategies, both on an open-ended and closed-ended basis. VCCs can be set up as a stand-alone entity, or as an umbrella entity with multiple sub-funds. Foreign corporate fund structures can be inward re-domiciled to Singapore as a VCC. The capital of a VCC will always be equal to its net assets, thereby providing flexibility in the distribution and reduction of capital. Courtesy of PwC Asian Investment Fund Centre VCCs require a Singapore based licensed or regulated fund manager, unless exempted under the regulations. VCCs could avail itself of theus check-the-box election.

32 Overall regulatory framework Singapore Variable Capital Company (VCC) Courtesy of PwC Asian Investment Fund Centre

33 Comparing Fund Forms (1/5) Restricted/ Exempt VCC Singapore ICAV set up as QIAIF Ireland Legal framework VCC legislation The Irish Collective Assetmanagement Vehicles Act 2015 (the ICAV Act ) Regulatory authority MAS/ACRA Central Bank of Ireland Judicial system Common law Common law Types of securities that can be issued Shares, debentures Shares, debentures 1 Number of required directors 2 Are directors independent to fund manager? Fund Manager directors required? No Yes (minimum one) Not required by the law. Irish Funds voluntary corporate governance code requires a minimum of 1 independent director No Directors must be resident? 1 Director must be resident 2 Directors must be resident Comparison by PwC Asian Investment Fund Centre The comparative are performed on high level and is not meant to be a legal or regulatory advice. Legal advise is recommended.

34 Comparing Fund Forms (2/5) Restricted/ Exempt VCC Singapore ICAV set up as QIAIF Ireland Register of directors required? Is the fund regulated? N/A Yes Yes Yes Can be exempt from regulation? Yes- mall offerings/private placement (less than 50)/institutional investors No Location of fund manager Singapore only Must be based in EU, or approved in equivalent non- EU countries. Minimum capital requirement N/A Minimum subscription is EUR 100,000. Self managed funds minimum capital of EUR 300,000 Investment risk spreading No No Comparison by PwC Asian Investment Fund Centre The comparative are performed on high level and is not meant to be a legal or regulatory advice. Legal advise is recommended.

35 Comparing Fund Forms (3/5) Restricted/ Exempt VCC Singapore ICAV set up as QIAIF Ireland Can FS be prepared at sub-fund level? Financial Statements GAAP Are Financial Statements publicly available? No SFRS, IFRS, US GAAP No Yes IFRS, US GAAP, Irish GAAP, Japanese GAAP and Canadian GAAP No Are Shareholder lists publicly available? No No Check-the-box election? Re-domiciliation allowed? Can be distributed to EU via AIFMD passport? Can be distributed to EU via private placement? Yes Yes No Yes Yes Yes Yes Yes # of tax treaties in the jurisdiction Comparison by PwC Asian Investment Fund Centre The comparative are performed on high level and is not meant to be a legal or regulatory advice. Legal advise is recommended.

36 Comparing Fund Forms (4/5) Restricted/ Exempt VCC Singapore ICAV set up as QIAIF Ireland Can the fund access the tax treaties? Yes Depends on the country Listing ability? Yes Yes Fund taxation No Exempt Subscription tax No No Master-feeder available? Yes Yes Timeline to market?? QIAIF 24 hours Cross sub-funds investments Yes Yes Share price As per NAV As per constitutive document Comparison by PwC Asian Investment Fund Centre The comparative are performed on high level and is not meant to be a legal or regulatory advice. Legal advise is recommended.

37 Comparing Fund Forms (5/5) Restricted/ Exempt VCC Singapore ICAV set up as QIAIF Ireland Distribution Valuation principles As per constitutive document Fair valued As per constitutive document and subject to minimum capital requirement Fair valued unless provided for differently in constitutive document. Are shareholder meetings required? VAT/GST? Are local service providers required for Company Secretary? Are local service providers required for Administrator? Are local service providers required for Custodian? Are local service providers required for Auditor? Comparison by PwC Asian Investment Fund Centre Not required?? Yes Yes - Potentially through tax incentives Yes - (PE/RE exempt) Yes Can be dispensed Exempt but can register for VAT and make reclaims No - but registered office in Ireland Yes Yes Yes The comparative are performed on high level and is not meant to be a legal or regulatory advice. Legal advise is recommended. Slides should be accompanied with narrative to enable comprehensive interpretation.

38 Brexit, Irish Economic and FDI Update Gerard Whitty, IDA

39 Q3 Economic Performance & Recent FDI Investment Announcements Gerard Whitty, Director, ASEAN & Taiwan IDA Ireland, Singapore Office

40 Ireland Economic Performance & Forecasts 40

41 Irish economy the top performer in Europe Fastest growing economy in the Eurozone for past 4 years GDP +7.2% in 2017 Growth across all sectors in 2017 National and International forecasts expect strong growth to continue in 2018 and GDP Growth 2017 Constant Market Prices GDP up 2.7% in Q year-on-year Source: IMF, World Economic Outlook July 2018 GDP Forecasts (%) European Commission Department of Finance Central Bank of Ireland IMF ESRI OECD Source: CSO Quarterly National Accounts, July 2018 Broad based sectoral growth in 2017* ICT Construction Professional, admin and Industry Agriculture, forestry and fishing Financial and insurance activities Arts, entertainment and other Public admin, education and Distribution, transport, hotels Real estate activities 2.4% 2.3% 2.1% 1.7% 1.3% 5.1% 7.6% 11.2% 16.0% 15.2% 0.0% 5.0% 10.0% 15.0% 20.0% *Growth in Gross Value Added at constant basic prices

42 Openness key to Ireland s economic success Total Exports ( bn) Composition of Total Exports Pharma & Chemicals 26% 66.4bn Computer Services 25% 64.6bn Business Services 12% 30.3bn Machinery & Transport Equipment 8% 21.4bn Services Goods Total Financial Services & Insurance 8% 21.1bn IDA Client Exports (% of total) Medical Devices* 6% 14.6bn 67% 66% 66% Food 4% 10.1bn *Miscellaneous manufactured articles Source: CSO; IDA calculations 42

43 Behind headline figures: Inflation and Competitiveness + Ireland consistently ranked amongst the top countries in the world to do business + Growing economy has not led to significant price increases: Inflation consistently below Euro area average, and supported by weak sterling since Brexit vote + Maintaining and improving competitiveness as the economy grows is a key government priority Inflation (% change) 2% 0.7% WEF Global Competitiveness Report 2017 World Bank Doing Business 2018 European Innovation Scoreboard Forbes Best Country in the World to do Business Reputation Institute Country Index 2017 Global Entrepreneurship Index 2018 IMD World Competitiveness Yearbook 2018 EIU Democracy Index M M M M01 Ireland Source: Eurostat, CSO, July 2018 Chart shows HICP measure of inflation Euro Area Ireland's International Ranking 43

44 Ireland: A grade from all major credit rating agencies High levels of investor confidence in Irish Economy Sovereign debt ratings upgraded Irish bond yields are trading below 1% and in line with core European sovereign yields Ratings Agency Long-Term Short- Term Outlook/Trend Date of Last Change Standards & Poor's A+ A-1 Stable Jun-15 Fitch Ratings A+ F1 Stable Dec-17 Moody's A2 P-1 Stable Sep-17 DBRS A (high) R-1 (middle) Stable Mar-16 R&I A a-1 Stable Jan-17 44

45 Labour Market 45

46 Over 2.2 million people at work in Ireland + Strong employment growth: 2.23million people now at work in Ireland + Employment at its highest level since Broad based employment growth across all sectors, not just FDI + For every 10 jobs lost in recession, 9 have been replaced + IDA clients created 1 in every 4 additional jobs in Ireland since Unemployment rate 5.1% in July 2018 lowest level since October Long term unemployment rate low at 2.1% + Ireland s unemployment rate below EU (7%) and Eurozone (8.4%) average Broad based Employment Growth across all Sectors (000s) Q Q Construction Accommodation and Industry Professional, scientific Education Human health and social Wholesale and retail trade Information and Administrative and Other activities Public administration and Transportation and storage Agriculture, forestry and Financial, insurance and Total Employment Growth: 359, Source: CSO, Department of Finance, Eurostat 46

47 Irish labour costs mid range in Europe + Irish hourly labour costs are mid range in Europe; below the Eurozone average but slightly above the EU average. + Irish labour costs are 10th in the EU, below countries like the Germany, Belgium, Luxembourg, France and the Netherlands. + Wage growth remains subdued (2% annually) Source: Eurostat Labour costs shown for business economy sectors Denmark Belgium Sweden Luxembourg France Germany Austria Netherlands Finland Eurozone Ireland Italy EU 28 United Kingdom Spain Slovenia Cyprus Greece Portugal Malta Estonia Slovakia Czech Republic Croatia Poland Hungary Latvia Lithuania Romania Bulgaria Labour Costs ( per hour)

48 Knowledge and Talent Education system ranked in the top 10 in the world. 98% participation rate in education amongst 18 year olds Highest in Europe. 53% aged have successfully completed third level studies (EU average 39%). Irish IT specialists best educated in EU; 82% have third level qualification (EU average 62%). Ireland has the fastest-growing tech worker population in Europe for 2017, with the expectation that impacts of the Brexit vote will see that figure grow further.* New International Baccalaureate School being established in Dublin. The IMD Competitiveness Yearbook 2018 ranks Ireland globally as: 1st for secondary school enrolment 1st for flexibility and adaptability 3rd for high worker motivation 5th for availability of skilled labour 5th for attracting and retaining talent 7th for financial skills 8th for foreign highly skilled personnel *Source: State of European Tech

49 Foreign Direct Investment Update 49

50 Investments in Ireland up 22% in first half of 2018

51 Key Announcements 2018

52 52

53 Why Ireland in a post-brexit scenario? Brexit further underlines the advantages of Ireland as a destination for FDI, which include: EU Market Access English language Common law system Track record in FDI attraction and existing base of FDI investors Highly skilled multilingual workforce Political and economic stability Consistent public policy regarding FDI Regulatory certainty Representation in EU policy and regulatory fora EU Trade Agreements Proximity to and connections with the UK and London 53

54 Impact of FDI on Irish Economy 54

55 MNCs make significant contribution to Irish Economy IDA clients Account for 10.2% of total employment in Ireland 58% of employment is outside of Dublin Spent 17.9bn in Irish Economy in 2016 on payroll and Irish sourced materials and services Invest 5bn in capex annually, half outside of Dublin Invest 1.6bn in-house R&D Account for 66% of national exports and 80%* of Irish corporation tax receipts. *Source: Revenue, April 2018; figure for all MNCs 55 55

56 Government Plan to increase carrying capacity of the economy National Planning Framework Core strategy to develop strong regions around key urban centres of scale. Comprises 75 National Policy Objectives including urban and regional population targets. National Development Plan ( ) Budgetary framework for 116 billion investment in public infrastructure and capital works over a 10 year period. 10 strategic investment priorities including education, housing, roads, public transport and the environment. 56

57 International Tax Environment 12.5% Corporate Tax Budget 2018 reaffirmed that the 12.5 per cent tax rate is, and will remain, a core part of our offering. U.S Tax Reform U.S. Business will always need to have operations in the EU, even after completion of the Tax Cuts and Jobs Act Our 12.5% tax rate will continue to be competitive in all likely outcomes and will offer certainty to international business. Digital Economy Digital taxation is a global issue that should be progressed on an international basis through the OECD, not through Europe. CCCTB Under the EU Treaties, for the European Council to move a policy area such as taxation from unanimity to qualified majority voting would require a unanimous decision. Ireland would not support this. OECD BEPS Ireland has committed to adopt OECD minimum standard measures to counteract Base Erosion and Profit Shifting as well as those set out under EU ATADs. The OECD has given Ireland its highest possible overall rating on transparency and exchange of information. Apple State Aid Ireland profoundly disagrees with the European Commission assessment and has lodged an appeal with the European courts. 57

58 IDA Ireland, Your Partner On Your Investment Journey Awareness (Consideration) Engagement (Short-listing) Investor Evaluation (Comparing) Decision (Validating) Implementation After-Care Introductions to Peer Companies Access to Government System Introductions to Industry Associations Collaboration With 3 rd Level Institutions Design and Hosting of tailored Fact-Finding Site Visits Information Gathering, Analysis and Evaluation RFIs (Requests for Information) IDA Funding Programmes & Incentives Public Relations & Media Support Employment Permits & Visas Property Solutions 58

59 Gerard WHITTY DIRECTOR, ASEAN & TAIWAN IDA IRELAND, SINGAPORE OFFICE / GERARD.WHITTY@IDA.IE To learn more log on to IDA IRELAND DUBLIN HQ idaireland@ida.ie