Ireland and Luxembourg can peacefully co-exist. There’s plenty of pie to go around.
With the news that Pat Lardner, who has led Irish Funds since 2012, is stepping down, it is timely to look at the state of the offshore centres of Luxembourg and Ireland. Lardner, who took over from Gary Palmer, inherited an organisation that was ill-equipped to compete with the more agile – and better funded – ALFI (Association of the Luxembourg Fund Industry), not to mention suffering from the sclerotic “support” of the Central Bank of Ireland.
Lardner tirelessly worked to change all that, and he leaves a trade body that is in great shape, with an industry that is much better aligned in terms of what still needs to be done to stay competitive. Granted, the industry failed (thanks to the sluggish response of the CBI and legislators) to come up with its delayed ILP competitor to Luxembourg’s thriving private assets franchise – truly a case of the barn door being closed after the horse had bolted.
That said, and despite those who suggest Ireland will never close the gap with Luxembourg, both can co-exist and thrive – and do. Luxembourg has established itself as the clear market leader for private assets funds (even if much of the back-office work is outsourced to Ireland), whilst Ireland remains the favoured domicile for ETFs and money market funds, inter alia. Some in Luxembourg believe that share-class ETFs will breathe life into that sector; others say that is whistling into the wind.
Nonetheless, there is plenty of business to go round: during Lardner’s time in office, for example, he oversaw the growth of Ireland’s share of the European fund market from 13pct to >22pct. According to the latest published figures, Luxembourg still leads at EUR8.6trn (USD9.8trn), with Ireland at EUR5.9trn (USD6.7trn).
Every administrator protests that they are domicile-neutral. To be fair, they are. When choosing a domicile, fund promoters are more influenced by the preferences of their target investors, distributors, and the (sometimes) ill-informed advice of their lawyers.
Promoters are spoilt for choice. In addition to Lux and Ireland, there are other centres of excellence, such as Grand Cayman, Guernsey, Jersey, Isle of Man, and Malta. Yes, the two big beasts will continue to take lumps out of each other, but this is not a zero sum game. Lardner’s legacy proves that: he closed the gap whilst protecting and strengthening Ireland’s existing franchises.