The positive contribution of the funds industry to Ireland’s economy17 May 2019
By Pat Lardner, Chief Executive, Irish Funds
The Irish Funds industry is €4 trillion in size, it helps people in 90 countries save and invest for the future, provides direct employment for over 16,000 people around Ireland and contributes a staggering €837 million in direct taxes to the Irish state. But what does this really mean and what does the industry do?
For centuries people around the globe have saved to provide for their future financial needs. Sometimes they invest on their own but more often they pool together their resources with other like-minded investors and create investment funds so they can spread the risks they are exposed and reduce the cost of doing so.
To make this happen there are three primary ingredients:
- The Investor: Coming from all over the world, they provide their money (capital) and seek to generate returns, all the while trying to manage risk;
- The Investment Manager: Their role is overseeing and deploying the monies entrusted to them by the investors;
- The Investments: These are the assets which generate returns – they can vary widely and include everything from companies listed on a stock exchange, to direct investments in economies (in areas such as infrastructure) or loans to governments and other entities which pay a rate of interest back to the investor.
The Irish funds industry
The Irish funds industry, by enabling investment managers (to establish investment funds) and make them available to investors in the EU and beyond (who invest seeking returns and to manage risk) ensures that everything about the fund is done in a way which complies with applicable laws, regulations and rules.
We’ve been providing these services across Ireland for decades, playing an increasingly important role in connecting investors with providers of investment solutions from all over the world. Achieving this has been done by providing a range of services, underpinned and regulated by EU law, ensuring it is efficient, effective and compliant to establish or service an investment fund here in Ireland.
Doing this has allowed investors, ranging from individuals right through to the largest and most sophisticated institutions and even government backed funds, to diversify their holdings across a vast array of global assets.
At an international level the Irish funds industry is significant. This is no accident. As an industry we have worked hard to provide a range of services which are familiar and trusted, all the time working hard to ensure that we are improving Ireland’s position on the world stage.
As a result of our hard work, we are recognised globally as a centre of excellence for this business. But despite all of our work and the developments occurring at an international level, the industry remains relatively unknown within Ireland. This begs the question - why is there not greater awareness of the growing significance and contribution of the Irish funds industry?
The nature of the work we do means we are exporting our services to the international market and therefore it is harder to see the local output of our services. To date, the funds industry in Ireland has primarily been focused on building up our reputation, serving our customers who come from over 50 countries and promoting Ireland across the globe.
Given the growing success of the Irish industry, and its significant contribution to the economy, we recognised the need for us to inform and build awareness here at home.
We believe that the best way to inform is by focusing on facts, examined and assessed independently, and conveyed in a way that would be both accessible and understandable. That’s why we commissioned Indecon International Research Economists to do this work by applying the techniques and methods that are internationally recognised and accepted by both government and private sector.
The Economic Impact Assessment Report which Indecon have produced has even surprised us by the scale of the findings.
So what did we learn from the Economic Impact Assessment Report?
Ireland benefits in very significant ways from the funds industry doing its job well and growing:
- 150+ companies directly employ over 16,000 people across ten different counties;
- The industry contributes over €830 million annually in direct taxes to the Exchequer;
- The industry enables regional employment opportunities to be offered across a significant number of our major cities and towns.
There are also significant benefits which flow into and across the economy as a result of what we do as an industry:
- Almost 33,000 of a total employment impact right across the country;
- €14 billion contribution to economic output which is being dispersed in communities throughout Ireland
- The support which our presence and track-record lends to Ireland’s reputation as a home for other types of knowledge-based activities
Because our industry is supporting the global requirement for savings and does so for an international audience, it has enormous scale potential and also tends to behave and react differently than sectors which are very domestically focused. We saw this during the financial crisis in 2008 and the years that followed where activity and employment in our industry were remarkably resilient and indeed grew. These characteristics help broaden the activity base in our economy, making it stronger and more diversified, which has positive and quantifiable knock-on effects across all sectors and markets.
The Indecon report means we now have a much clearer, fact-based understanding of the funds industry in Ireland, and the benefits of it at both a national and a regional level. From here our priority and focus is on ensuring that we continue to provide a solid, respected and trusted environment to enable future investment and growth.
So how do we continue to provide a solid, respected and trusted environment?
- Ensuring our business environment encourages firms to locate funds activity here.
- Provide the tools and capabilities here which allow investment managers to provide the solution the investor wants; in the form they want it and when they have capital to invest.
- Continue to embrace the role of regulation (we are a regulated industry) and encourage that it is applied in ways that are proportionate, efficient and achieves its aims without undermining our competitive position internationally.
- Promotion of the funds industry around the globe.
- Investing time and effort to make sure that industry is attracting the best and brightest from a range of backgrounds to broaden and deepen our skill-sets.
As an industry we welcome the soon-to-be published Investment Limited Partnerships (Amendment) Bill 2019, due to be published in the coming days, which will help modernise the current law that is in place and allow us to maintain our competitive position in the international market.
We look forward to working with our members and Government to maintain Ireland’s fantastic reputation encouraging those who are here to remain here and promoting Ireland as the best place for others to situate themselves.