Ireland dominates European active ETF flows
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Why is Ireland leading in active ETF market share?
Breakfast Business with Enterprise Ireland on Newstalk.
Now, let's talk about something as we end the year. We have a massive funds industry here in Ireland, as you may know. And in one particular area, we found some fascinating figures in the area of exchange-traded funds. These are the active ones. Ireland now has a huge 94% market share as the year comes to an end, and you taught up the figures.
What types of exchange-traded funds are discussed?
And joining me here in studio to ask why that is and where the industry goes from here is Pat Lardner, who's the Chief Executive of Irish Funds, and he's here with me now. Pat, you're very welcome. Good morning. Thanks for having me, Emmett. So there's different types of exchange traded funds, the passive ones and the active ones.
How has Ireland's ETF industry evolved over the past 25 years?
We're used to the traditional ones, which a lot of people listening in might have some of their own money wrapped up in. But this is a particular segment of that where we got in early and we have a big market share.
Yeah, so we've been leaders in the ETF part of the market. The first ETF was set up here 25 years ago.
What factors contribute to Ireland's success in the ETF market?
As you say, a lot of the early ETFs were what they called passive ETFs. So they were trying to replicate or mimic the constituents of a broad index, so well-diversified indices. What we're seeing more recently is that managers now are delivering active strategies where they make decisions to either to produce an outcome or to beat a market index and through the delivery mechanism of an ETF. And in that active ETF segment, Ireland, as you say, has a very, very strong market share. But based on the fact that we have been leaders in this space for 25 years because we were early, we were organized, we were innovative. And I think for us to continue to be successful in other parts of the market, as we are in ETFs, we have to be very agile, whether that be in product structures,
in our regulation, in the delivery of legislation. But thankfully, we've got a good news story, but one that we're not resting at all on our laurels because we know the needs of investors are changing day by day.
What challenges does Ireland face in the ETF industry?
And was this like a new product category, effectively? I mean, are we taking it from somebody else?
So it's not a new product category. I mean, if you think of an ETF, it's a delivery mechanism. So if I wanted to use an analogy, in the same way that people bought music physically and traditionally and then moved on to streaming, an ETF is a more accessible, very, very digitally enabled way for people, and particularly younger people and newer investors to get access. The active ETF is allowing those managers that would have delivered their funds in traditional form to now use that ETF wrapper to make it very accessible, to democratize it. It's low cost as well.
So why is Ireland getting this business? Is it tax? Is it regulation? Is it just the general environment? Or as you said, is it first mover? So why are we getting this stuff and why isn't it going to London, Paris, Frankfurt, etc.
?
So it's a mixture of all of those things. When you've established an early market position, as we have in ETFs, where all of the expertise, which is provided by people living and working all over Ireland, provide this expertise. But also the fact that actually people know that when they come here, that the regulatory environment is well understood and well practiced. There is a paradox, though. Despite the fact that Ireland is one of the easiest and best places in the world to create an ETF, it's actually one of the most difficult places in the world to effectively buy one because of the tax treatment that we have on exchange-traded funds, something that we are hoping and urging government to address very early in the new year when they launch their savings roadmap.
Now, a lot of people listening in will be eating their breakfast or whatever and say, listen, that's great for Pat Lardner and the funds industry, but what's the wider economic spin off of all of this stuff? So can you walk me through? It's great to have these assets here. I'm sure it boosts lots of figures and balance sheets and fund totals and so on.
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Chapters
7 chapters
1
Why is Ireland leading in active ETF market share?
0:01–0:27
2
What types of exchange-traded funds are discussed?
0:27–0:40
3
How has Ireland's ETF industry evolved over the past 25 years?
0:40–0:57
4
What factors contribute to Ireland's success in the ETF market?
0:57–1:52
5
What challenges does Ireland face in the ETF industry?
1:52–3:43
6
How does the ETF market impact the wider Irish economy?
3:43–6:34
7
What does the future hold for Ireland's ETF industry?
6:34–8:44