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Financial centre
STANDSTILL SITUATION? Dublin has long been Luxembourg’s main competitor as a funds domicile. Will the new Irish government introduce policies that could tip the scales? Text: Aaron Grunwald — Photo: Olivier Minaire
Dublin has long been Luxembourg’s chief European rival as a funds centre. Could that change? At press time Enda Kenny was set to become Ireland’s prime minister after February 25 elections. He has pledged his coalition government will renegotiate the country’s €85 billion EU-IMF bailout and resist any effort to raise its famously low corporate tax rate. Yet the economic environment in Ireland is unlikely to impact the competitive equation in the near term, say the experts interviewed by Delano. “The Dublin-Luxembourg debate that raged so strongly in the 1990s has evolved considerably,” states Ed Moisson, head of UK and cross-border research at Lipper FMI, referring to the years that scores of asset managers decamped from Luxembourg after Ireland scrapped money market funds taxes. However, the question is “irrelevant now since the location decisions of most established groups were made some years ago,” Moisson explains. “There is no shift from Dublin to Luxembourg,” concludes Charles Muller, deputy director general at the trade group ALFI. “Both centres have their raison d’être.” “It is still business as usual for both locations,” concurs Eoin MacManus, financial services group partner at Ernst & Young Ireland. “They’re both still the strongest locations in the euro zone for asset management and domiciles.” He explains that Dublin has gained market leadership in alternative funds and Luxembourg has maintained leadership in regulated UCITS funds, “and I think it will remain that way.” MacManus also points out that “sovereign debt has very little to do with the credit
DENIS VAN DEN BULKE: Luxembourg will not take market share from Dublin, but the Grand Duchy is better positioned to capture growth from emerging Asian markets
risk of a UCITS.” Nevertheless, “it is fair to say Ireland is having to do a lot of talks to reinforce that message,” he admits. In fact, Ireland’s financial reform bill did include provisions to make it easier for established funds to move to Ireland from competing jurisdictions, MacManus says. However, the target of those measures is the Caymen Islands. Caymen officials only admit that four funds have moved to Dublin, although Macmanus reckons the true number is higher based on client activity he is seeing. Denis Van den Bulke, managing partner of the law firm Vandenbulke, agrees that Ireland will maintain its advantage in the alternative fund space, where Dublin has expertise that Luxembourg simply lacks. “The AngloSaxon world is more accustomed to hedge
funds than continental Europe, which is more traditional.” On the other hand, Van den Bulke is more bullish on the Grand Duchy’s future growth prospects in comparison to Ireland’s. While flows from Europe and the US will slow, he sees a bigger opportunity coming from Asian markets, which “are fond of the UCITS label,” as it is “accepted as a valid product by local authorities and recognized in the market by name.” And, he stresses, in countries from India to Singapore, “UCITS means Luxembourg.” While Ireland will likely keep its share in the money market fund space, “it’s a low cost product that doesn’t bring in good margins for the industry.” He adds, “Maybe there will still be a lot of assets in Ireland, but its contribution to the economy is less than in Luxembourg.”
March 2011 - delano - 37