Los Angeles Seminar. 10 October irishfunds.ie

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2 Los Angeles Seminar 10 October irishfunds.ie

3 PREMIUM SPONSORS 3 irishfunds.ie

4 EVENT SPONSORS 4 irishfunds.ie

5 Los Angeles Seminar Welcome Remarks Pat Lardner Chief Executive - Irish Funds 5 irishfunds.ie

6 Total Assets Under Administration Split between Irish domiciled & Non Irish Funds Total Assets Under Administration 4,500 4,000 3,806 4,095 4,251 3,500 3,375 3,000 2,722 2,500 2,199 2,000 1,883 1,886 1,394 1,398 1,443 1, , ,899 2,085 2, , , , June- 17 Net Assets Domiciled Net Assets Non Domiciled Source: Central Bank of Ireland, 2017 EUR Billion 6 irishfunds.ie

7 Irish Domiciled Assets UCITS represent 75% of Irish Domiciled Assets 86 UCITS Man Cos 156 AIFMs Registered or Authorised 597 AIFMs operating in Ireland on cross border basis 364 ICAVs established (since 18 March 2015) Source: Central Bank of Ireland, irishfunds.ie

8 European Investment Fund Landscape 13 trillion in assets 8 trillion UCITS 5 trillion Alternative Investment Funds (AIFs) 1 trillion of net inflows into UCITS over last 3 years 463 billion net inflows into European funds 2016 (>30% of which went to Irish domiciled funds) Source: Central Bank of Ireland, irishfunds.ie

9 Growth of Largest European Fund Domiciles % Growth Europe Luxembourg Ireland France Germany UK Percentage Growth Rates in Assets in over the last 5 years for the largest fund domiciles in Europe Ireland is the fastest growing domicile 198% growth in Irish domiciled assets in the last 5 years Versus European average of 178% 2011 base year Source: EFAMA Statistics, irishfunds.ie

10 Irish Funds: Passport to Europe & Beyond UCITS funds & AIFMs benefit from an EU wide passport and can be sold in any other EEA member state without need for additional authorisation Global Distribution of Irish Funds: 70 countries Top 10 countries where Irish Funds registered for sale 1. UK 6. Austria 2. Germany 7. Luxembourg 3. France 8. Sweden 4. Switzerland 9. Italy 5. Netherlands 10. Spain 10 irishfunds.ie

11 Irish Funds Maximising Distribution 11 irishfunds.ie

12 Irish Domiciled Funds Net Sales 200,000 Net Sales - Total Domiciled Funds 150,000 EUR Mn 100,000 50,000 98,463 85, , , , ,100 Equity Funds Bond Funds Balanced Funds Money Market Funds AIF 0 Net Sales into Irish funds by type Bn YTD - July Net Sales - Total Domiciled Funds 2017 Dec-13 Dec-14 Dec-15 Dec-16 YTD July 2017 Net sales for YTD July 2017 have already surpassed the total for 2016 (by > 45bn) which itself was a record year Source: Central Bank of Ireland, irishfunds.ie

13 ETFs - An Irish Success Ireland as a Domicile for European ETFs Total Assets of European ETFs - Bn Net Sales into All European ETFs 2016 Bn Rest of Europe 248bn 44% Ireland 310bn 56% 3bn 7% Ireland Rest of Europe 41bn 93% Source: Irish Funds, June irishfunds.ie

14 Looking Ahead Brexit: Three interdependent themes Current context OVER 2,000 IRISH FUNDS SOLD TO UK INVESTORS 1 Target outcome Continuity in UK investor access to EU/Irish funds Distribution Management Models ( Delegation ) 613 bn 2 IN IRISH FUND ASSETS MANAGED BY 170+ UK FIRMS IN IRELAND 2 SOURCE: 1-Lipper IM Dec Monterrey Ireland Fund Report 2016 Growth Increase Ireland s growth trajectory as an international asset management centre Continuity in UK firm management of Irish funds 14 irishfunds.ie

15 International asset management centre Opportunity Benefits Re-affirm Ireland s attractiveness as an international asset management centre 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 & Luxembourg 1 Growth Asset Manager Activity 800+ investment firms active in Ireland 4 Increased presence of front office activities 18 of the top 20 global AMs have Irish funds 4trn total AuA, 300bn managed from Ireland 2 AM counterparties already in transit from UK NOTES: 1. Source PwC 2. (STEM = Science, Technology, Engineering & Mathematics) & _all_undergraduate_by_level_and_field.xlsx 3. IFS 2020 Action Plan 2017 ( & IDA Ireland 4. MiFID firms, UCITS ManCos, Irish AIFMs & Non-Irish AIFMs Infrastructure Space for 100K new employees by 2020, 100K new houses 3 Leading global tech centre & fintech location London-Dublin: Most flight options in Europe 35K+ employed in international financial services in Ireland, 14K in funds industry 130K degree-level graduates across business, law and STEM w/ 20K new grads p.a. 2 Solution Provide UK managers with options to support the establishment of a physical presence in Ireland 15 irishfunds.ie

16 Brexit Update Colin Farrell PwC 16 irishfunds.ie

17 Brexit timeline 17 irishfunds.ie

18 Three interdependent themes Current context OVER 2,000 IRISH FUNDS SOLD TO UK INVESTORS 1 Target outcome Continuity in UK investor access to Irish/EU funds Distribution Management Models ( Delegation ) 613 bn 2 IN IRISH FUND ASSETS MANAGED BY 170+ UK FIRMS IN IRELAND 2 SOURCE: 1-Lipper IM Dec Monterrey Ireland Fund Report 2016 Growth Increase Ireland s growth trajectory as an international asset management & servicing centre Continuity in management of Irish/EU funds 18 irishfunds.ie

19 Structuring options: Management models Global Asset Managers Regional Asset Managers MiFID Firm Super ManCo w/ Add-on Authorisations ( v2 ) Super ManCo w/ Delegates ( v1) Wider range of permissions available v2 : add-ons enable management w/out MiFID manager as delegate, including mandates v1 : widely used standard model w/ delegation option SMIC Simple option for single umbrella fund NOTES: Management Models ( Delegation ) 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 This depiction is intended to be for informational purposes only and all requirements should be reviewed alongside a firm s / fund s legal counsel. 19 irishfunds.ie

20 What does the industry in Ireland provide? 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 many other global financial centres Growth Asset Manager Activity 800+ investment firms active in Ireland 1 Increased presence of front office activities 18 of the top 20 global AMs have Irish funds 4trn total AuA, 300bn managed from Ireland 2 AM counterparties already in transit from UK NOTES: 1. CBI Register: MiFID firms, UCITS ManCos, Irish AIFMs & Non-Irish AIFMs 2. IFS 2020 Action Plan 2017 ( & IDA Ireland 3. (STEM = Science, Technology, Engineering & Mathematics) & _all_undergraduate_by_level_and_field.xlsx Infrastructure Space for 100K new employees by 2020, 100K new houses 2 Leading global tech centre & fintech hub London-Dublin: Most flight options in Europe 35K+ employed in international financial services in Ireland, 14K in funds industry 130K degree-level graduates across business, law and STEM w/ 20K new grads p.a irishfunds.ie

21 What does the industry in Ireland provide? EU/EEA Single market access Global investor access Efficient, predictable & robust regulator 7th IMD WORLD COMPETITIVENESS 2016 YEARBOOK Low tax / low cost environment Commitment from Government 1 st FLEXIBILITY AND ADAPTABILITY OF PEOPLE Service excellence & scale Infrastructure: legal, language, education & telecoms 1 st IN EUROPE FOR COMPLETION OF 3 RD LEVEL EDUCATION 21 irishfunds.ie

22 MiFID 2 Update- Impact on US Managers John Aherne A&L Goodbody 22 irishfunds.ie

23 Background and overview MiFID II: taking effect from 3 January 2008 Central measure for regulation of investment firms conducting investment services and markets in the EU Seeks to make financial markets in Europe more resilient, transparent and investor-friendly in response to the financial crisis UCITS management companies/alternative investment fund managers (AIFMs) out of scope when managing and distributing UCITS/AIFs US based asset managers, with no EU establishment, generally out of scope but potential indirect impacts More complicated where US based manager is a delegate of an EU MiFID firm and there is a contractual look through approach 23 irishfunds.ie

24 Investment research Best execution Transaction reporting Taping & Recordkeeping Advisory Delegation from EU MiFID firm EU MiFID firm Distribution Product governance Costs transparency Commissions Post-trade transparency Position limits Dark pools double volume cap Direct market access Trade on EU Trading Venues Trade with EU CPs Transaction reporting Equities/on exchange Repapering broker terms MAIN irishfunds.ie

25 Distribution Product governance and distribution Scope: collaboration with a MiFID manufacturer/sales or marketing via an EU MiFID distributor Target market Product approval and oversight framework Information sharing and reporting (negative target market) EU distributor remuneration models - Prohibition for certain segments (independent advice and managed) - More onerous thresholds and disclosure for other commissions on other channels Costs transparency - Point of sale and ongoing reporting including breakdown of product costs - Transaction costs MAIN irishfunds.ie

26 Investment research Buy-side: prohibition on receiving inducements in the form of research leads to unbundling costs of execution and research EU Sell-side: obligation to separate the costs Hard dollar approach: options for EU investment managers: client funded research payment account funded from P&L Impact for US investment managers/eu interactions with US sell-side - Outsourcing requirements - US broker dealers/investment advice issue - Note position on direct delegation from an Irish AIFM/UCITS manco, not in scope! MAIN irishfunds.ie

27 Trading/Markets issues Some key areas to flag: Best execution Transaction reporting (T+1); enhanced information required from non- EU firms when trading in EU instruments with an EU broker/counterparty or on an EU trading venue Impacts on OTC trading and dark pool trading Price discovery: expansion pre/post trade transparency to fixed income, ETFs and derivatives Position limits for commodity trading Direct market access via EU brokers MAIN irishfunds.ie

28 Access to EU capital Third country access to EU customers (e.g. via managed accounts) Set up a Branch to access all customer types locally and passport services to wholesale clients Register with ESMA to provide investment services without having an establishment subject to ESMA equivalence assessment Rely on reverse solicitation ( exclusive initiative of the client test) National regimes if available (e.g. Ireland: preserves overseas persons exemption regime) AIF/UCITS vehicles with a delegated services model remain the optimal models MAIN irishfunds.ie

29 Irish Funds Industry Update Talks Michelle Ridge, Matheson John Perry, Deloitte 29 irishfunds.ie

30 Investment Limited Partnerships 30 irishfunds.ie

31 Updates to Investment Limited Partnership legislation Many PE managers already active in Ireland ICAV can cater for most PE features However, LP is conventional structure for PE funds Legislative Reform Strategic priority Government s Strategy for Ireland s Financial Services Sector (IFS 2020) Action Plan 2017 Investment Limited Partnership (Amendment) Bill 2017 approved for drafting on 18 July irishfunds.ie

32 Investment Limited Partnership Amendments Expected changes include: Bringing the range of publicly available information in line with other fund vehicles Allow non-material changes to be made to the partnership agreement without an investor vote Expanding the express limited liability safe harbours for limited partners Allow for the establishment of umbrella ILPs Relaxing limitations on withdrawals of capital 32 irishfunds.ie

33 Background to CP86 European Directives AIFMD and UCITS require European passported funds to have a European management company Management company can be external or internal ( SMIC ) Management company cannot be letter-box entities Management companies can delegate investment management to other entities including US managers 33 irishfunds.ie

34 CP86 Update Final guidance issued on 19 December 2016 Existing regime requires the DP to be located in Ireland or to be a Director of the relevant company CB has granted additional flexibility on location All management companies must have 50% of directors and DPs in EEA 34 irishfunds.ie

35 Timing and managerial functions Existing entities have until 1 July 2018 to implement the guidance, including replacing the existing managerial functions with the six new ones (unchanged over those previously proposed by the Central Bank) namely: 1. Fund risk management 2. Operational risk management 3. Investment management 4. Regulatory compliance 5. Capital and financial management 6. Distribution 35 irishfunds.ie

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38 Closing Remarks Tara Doyle Chairperson, Irish Funds Partner, Matheson 38 irishfunds.ie

39 PREMIUM SPONSORS 39 irishfunds.ie

40 EVENT SPONSORS 40 irishfunds.ie

41 Los Angeles Seminar 10 October irishfunds.ie

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