Maples and Calder have carried out our latest key trends analysis of the Irish Funds market.
We track non-confidential statistics on each fund / sub-fund we establish for our clients and look to extract statistical information on the characteristics of those funds and the trends that we are seeing.
Introduction We are often asked what we are seeing in the Irish funds market. To assist our clients make informed decisions on Irish projects we have conducted a statistical analysis on every fund that we have helped launch since 2012 in order to discern trends and patterns. Basis of the Analysis – Our informed view of the market We have analysed key terms from each of the funds to form the basis of the insights into market practice and Irish fund trends set out in this analysis. We have used the collected data to assist us in determining the areas in which we can develop services to assist our clients, as well as sharing the analysis with our clients and contacts. All information is collected on a strictly confidential basis and does not disclose client names or commercially sensitive data. We are independently ranked as #1 legal adviser in Ireland for funds, based on number of funds advised and number of new funds established, as per the Monterey Insight Ireland report 2015. This gives us cutting edge expertise in supporting innovative product development, whether in the area of UCITS or AIFMD and whether related to mutual funds, hedge funds, real estate funds, private equity funds or managed account platform structuring. In maintaining and strengthening our market share, we have extended our regulatory expertise across a range of issues impacting UCITS and AIFs as well as launching a number of ancillary services. New sub-funds advised on 2010-2015 Maples market share ranking in each of the last 6 years New sub-funds advised on 2014-2015 30% MARKET - FOR NEW SUB-FUNDS ADVISED ON SHARE 460 60 Source: Lipper Ireland Fund Encyclopedia 2010-2011. Monterey Insight Ireland Report 2012-2015. 1 Product Regime 2012-2015 - UCITS v AIFs QIF / QIAIF UCITS Non-UCITS Retail/RIAIF 2012 2013 2014 2015 35% 6% 59% 34% 6% 60% 48% 1% 51% 49% 1% 50% Since the Irish funds industry started, a high proportion of funds have been established as UCITS (which is why asset levels in Irish UCITS are significantly higher than in QIAIFs). However, there has been a surge in the launches of alternative products in the last five or six years with the QIAIF being the most popular product for new launches. The reasons for this include: (1) growth of managed account platforms; (2) co-domiciliation/re-domiciliation of offshore alternative products in response to AIFMD; and (3) increased appetite among EU institutional investors for regulated funds. We are now observing quite an even split in terms of numbers of new funds established (between UCITS and QIAIFs) and, most recently, have even seen a notable uplift in the numbers on the UCITS side. Sustained Asset Growth: UCITS and AIFs €1.446 trillion in assets in Irish UCITS representing a 280% increase in asset 280% levels since end of 2008 €369 billion in assets in Irish QIAIFs representing a 393% increase in asset 393% levels since end of 2008 Source: Irish Funds / Central Bank of Ireland, December 2015. 2 Fund Launches New Fund Launches 2012-2015 Umbrella Fund / Single Fund 2012-2015 New Fund Platform New Sub-Fund on Existing Platform 2012 41% 59% 2013 17% 15% 85% 19% 81% 2014 2015 83% From 2013 onwards there has been a marked trend towards launching sub-funds on existing platforms. The growth in managers adding on sub-funds to existing platforms instead of establishing entirely new structures is aligned with our sense that managers are looking to rationalise and consolidate product ranges. 2012 2013 31% 12% 69% 88% 2015 30% 70% 2014 13% 87% Umbrella Fund Single Fund This graphic shows that the umbrella structure is the default option. The umbrella structure provides greater administrative efficiencies, investor and service provider familiarity. However, some clients do still favour standalone/single fund structures. 3 UCITS UCITS Legal Structures 2012-2015 - New funds and new sub-funds of existing umbrellas ICAV CCF Unit Trust PLC 78% 92% 93% 87% 4% 6% 3% 13% 13% 5% 2% 4% 2012 2013 2014 2015 UCITS Legal Structures - New Funds Only - 2015 ICAV CCF PLC 57% 29% 14% The corporate (plc) structure has traditionally been the default vehicle of choice. However, following the introduction of the ICAV in March 2015, there has been a marked trend towards the ICAV. The ICAV is now the vehicle of choice and we expect that this will only increase in the coming years. See the ICAV Key Features graphic on page 6. 4 QIAIF Legal Structures - New Funds Only - 2015 QIAIFs QIF / QIAIF Legal Structures 2012-2015 ICAV PLC Unit Trust CCF ILP 64% 83% 49% 48% 64% 5% 1% 1% 12% 32% 32% 4% 2% 2012 3% 2013 2014 2015 PLC Unit Trust CCF ILP ICAV 77% 23% Traditionally the preference for the QIAIF lay with the corporate (plc) structure. The unit trust structure was also commonly used by US managers for tax transparency purposes. However following the introduction of the ICAV there has been a marked shift towards ICAVs as the vehicle of choice. The ICAV has the ability to "check-the-box" from a US tax perspective. See the ICAV Key Features graphic on page 6.
ICAV Key Features Increase in the use of Ireland for Cross-Border Management Company Solutions To support the operation of EEA authorised UCITS and AIFs, an increasing number of international fund sponsors are establishing Management Companies ("Mancos") in Ireland. These Mancos are authorised as AIFMs, UCITS Management Companies or dual authorised under both regimes. It is notable that 16 of the top 20 sponsors (i.e. 80%) of Irish authorised funds (ranked by AUM) operate or are currently in the process of establishing a Manco in Ireland. For further details, please refer to our client update entitled "Setting up a Manco in Ireland – Key Considerations". Number of top 20 fund sponsors operating only self-managed UCITS and 4 /or internally managed AIFs Number of top 20 fund sponsors operating or currently in the process of establishing a Manco in 16 Ireland Key Features PLC ICAV Facility to 'check the box' for partnership status/disregarded entity for US tax purposes ✕ ✓ Separate accounts for sub-funds ✕ ✓ No statutory requirement to apply risk spreading ✕ ✓ Facility to make (non-material) changes to constitutional document without investor approval ✕ ✓ Not required to be incorporated with the Irish Companies Registration Office ✕ ✓ Facility to dispense with AGM in certain circumstances ✕ ✓ Flexibility on type of accounting standards that may be used for financial statements ✕ ✓ 6 Investment Strategy 2015 Equity / Equity Long-Short Private Equity / Distressed Debt Real Estate Fund of Funds Fixed Income Alternative 36% 28% 15% 9% 7% 5% Alternative strategies have now replaced equity based strategies as the largest. Equity focused strategies are down from 46% in 2012. EU - Based Managers – Regional Investment Focus 2015 38% 4% Latin America 4% Africa 10% Worldwide North America 33% Europe 6% Asia 4% Middle East North America - Based Managers – Regional Investment Focus 2015 53% 2% Australia 18% Worldwide Europe 24% North America 2% Asia 7 Existing Irish Presence / New Market Entrant 2012-2015 Investment Manager Profile Profile of Managers – AUM 2015 > $100m - $500m > $500m - $1 billion > $1 billion < $100 million Less than US$100M US$100M - US$500M 18% 5% 2% Greater than US$1B 75% US$500M - US$1B In 2012, 27% of managers we worked with had less than $500 million under management, with 65% > $1 billion. That has now moved to 2% below $500 million and 75% > $1 billion. Increasingly, the majority of in-flows to hedge funds are from institutional investors. Institutional money has typically favoured larger managers and this trend is reflected in our statistics. Existing Investment Manager New Investment Manager 2012 2013 2014 2015 17% 18% 13% 22% 83% 82% 87% 78% These statistics are reflective of the fact that Ireland is a mature domicile and many larger institutional asset managers already have a presence here. 8 Investment Manager Location Investment Manager Location 2015 As at December 2015, 32% of investment managers we worked with were based in North America, which represents a steady increase from only 23% in 2012. Reasons for this growth in US activity can be attributed to factors including: (1) continued growth of the alternative UCITS brand in the US; (2) managed account platform appointments; and (3) AIFMD prompting co-domiciliation. The EU remains the biggest manager market (with a large proportion of this being UK based managers). 55% 4% Europe - EU Africa 32% North America 5% Asia 4% Europe - Non EU 9 Fees Anti-Dilution Levy 2012–2015 Yes No 2012 30% 70% 2013 24% 28% 72% 58% 42% 2014 2015 76% Investment Management Fees 2015 Performance Fee Breakdown 2015 7% 33% 49% 11% 0 - 0.99% 1 - 1.99% 2% or more None 2% 42% 36% 20% Variable Less than 20% More than 20% 20% We have tracked the changes to fee structures since 2012. Management fees have come under significant pressure with less than 11% of funds having a 2% management fee in 2015. Performance fees have also come under pressure. However, 42% of funds still retain a 20% performance fee for their main class of shares/interests. 10 Global Offices Cayman Islands London Montreal New York Boston San Francisco Delaware Dubai Hong Kong Singapore MAPLES AND CALDER MAPLESFS Dublin British Virgin Islands Luxembourg Netherlands 11 Contacts Barry McGrath Head of Investment Funds, Dublin +353 1 619 2029 email@example.com Peter Stapleton Partner +353 1 619 2024 firstname.lastname@example.org Stephen Carty Partner +353 1 619 2023 email@example.com Carol Widger Partner +353 1 619 2762 firstname.lastname@example.org Adam Donoghue Partner +353 1 619 2718 email@example.com Ian Conlon Partner +353 1 619 2714 firstname.lastname@example.org Eimear O'Dwyer Partner +353 1 619 2065 email@example.com Ciara O'Leary Partner +353 1 619 2034 firstname.lastname@example.org John Gallagher Partner +353 1 619 2073 email@example.com Pádraig Brosnan Partner +1 345 814 5441 firstname.lastname@example.org Emma Conaty Head of Global Registration Services +353 1 619 2708 email@example.com Naomi Daly Senior Vice President +353 1 697 3275 firstname.lastname@example.org Fergus McKeon Consultant +353 1 619 2189 email@example.com