Assets in Ireland-domiciled ETFs top €1tn for first time

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Exchange traded funds in Ireland have risen above €1tn for the first time, as a growing majority of providers look to establish themselves in the country.

Ireland-domiciled ETFs rose above €1tn in assets under management at the end of June, making up 68 per cent of the nearly €1.5tn European market, according to Morningstar data.

Luxembourg is the next largest domicile for ETFs at €295bn, while the rest of Europe has €186bn combined.

“The overall fund industry is currently seeing a secular trend towards greater ETF investment — a phenomenon that will benefit Ireland thanks to its solid footing in this space,” said Ralph Williams, associate director at Broadridge.

This article was previously published by Ignites Europe, a title owned by the FT Group.

Assets in Irish ETFs have grown 160 per cent since the end of 2018 compared with 34 per cent for other funds in the country, causing ETFs’ share of Ireland-domiciled assets to jump from 21 per cent to about a third, according to Broadridge data.

“ETFs have seen breakneck growth rates compared to other fund types, suggesting that, in this space at least, the Celtic Tiger is roaring again,” Williams added.

Gerard Crossan, wealth and asset management director for Europe, the Middle East, India and Africa at EY, said ETFs continued to grow organically across Europe and were winning significant market share from the mutual funds market.

“Ireland is a global centre of excellence for the wider, global asset management industry, and there is significant [ETF] activity within the region,” he said.

“Ireland is well placed to capture increasing inbound flows, in large part due to significant investment in ETF technology and talent by the Irish fund administrators.

“Ireland already has strong regulatory frameworks in place, and with clear government and industry support, we expect this market to continue its growth trajectory.”

Jose Garcia Zarate, associate director of passive strategies at Morningstar, said Ireland had always been a “powerhouse” as a fund domicile.

“It comes as no surprise that from the start of the development of the ETF industry many providers have chosen it as their domicile of choice,” he said.

Ireland benefits from a tax competitive advantage for ETFs offering exposure to US equities, due to a double taxation treaty.

“This has prompted other ETF providers who had not traditionally used Ireland as their domicile of choice, for example Amundi, to launch a range of Irish-domiciled ETFs precisely for US equity market exposure, whether standalone or as part of global benchmarks such as MSCI World,” Garcia Zarate said.

Amundi launched a 10-strong range of Dublin-domiciled ETFs in October last year.

The firm has since launched six Irish ETFs that are duplicates of primarily US equity-focused Luxembourg ETFs, and recently transferred a global equity ETF from Luxembourg to Ireland.

BNP Paribas Asset Management also recently began launching Irish ETFs, having previously focused on Luxembourg as a domicile, while Abrdn and Axa Investment Managers chose Ireland when launching their new ETF businesses.

Garcia Zarate added that Ireland’s prominence as an ETF domicile was “undisputed” from the moment BlackRock decided to focus its iShares brand there.

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iShares, the largest ETF provider in Europe with an overall market share of 45 per cent, has 92 per cent of its European ETF assets under management in Ireland, Morningstar data show.

The brand accounts for more than 60 per cent of Ireland-domiciled ETF assets, according to Broadridge estimates.

Williams said Ireland’s successful ETF industry might have originated with the promise of tax benefits, but its “rapid emergence” as Europe’s market leader has seen it accrue many other advantages.

“A lot of the attraction is down to scale, with the segment now boasting a real ecosystem of expertise and talent,” he added.

*Ignites Europe is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at igniteseurope.com.