Chapter 1: 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.
Chapter 2: 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.
Chapter 3: 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.
Chapter 4: 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.
Chapter 5: 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. But what's in it for the rest of us?
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Chapter 6: How does the ETF market impact the wider Irish economy?
20,000 direct jobs located all over the country with 46% of those jobs based outside of Dublin. Because the industry is here, almost an additional one other person for every one of those jobs is here. And a billion euros in revenue. And the reason why it's really important for Ireland in a more competitive global environment is that we are serving investors from all over the world.
So the demand for what we do is not limited by what happens in the domestic economy. And also because we're addressing a global market. And remember, the funds that we look after here are distributed to 90 countries around the world. The scale and the potential growth opportunity for Ireland is massive.
And that's why we are very strong advocates of more agility, greater delivery, making sure a bit like when ETF started 25 years ago, that we're at the start of emerging trends, whether it be private assets,
tokenization structures, because as you said, in order for us to have high market share, you don't get that overnight, but you get it by swift, decisive action early as these innovations actually bed in.
Now, can you draw sort of a moat and drawbridge around the industry? Is there competitive threats out there? Are there other locations trying to steal your lunch in other markets that maybe we wouldn't be used to? I know Luxembourg in particular is another one that gets mentioned. So who's out there, the non-Irish Pat Lardner who's saying, well, leave Ireland and come to us?
So more and more, we're seeing jurisdictions around Europe and internationally trying to mimic the success that we have here because of the fact, as I said, it's a growing industry. The needs for people to save not just in Ireland, but around the world are growing. So we would see active competitive threats to what we do, which is why when we talk about numbers being up. That is eaten bread.
That is flows that has happened. That is no guarantee to the success of the industry going forward. And we want to make sure working closely with government in a proactive, agile way that we can deliver and make sure that those people that are driving to work this morning around the country
can have long careers, that we can employ more people around the country, and that we can position Ireland strategically within Europe as a great place to support investing. And that's very important to you politically for our place in a world that is changing very, very quickly.
And in some ways, have you been fortunate in the sense that the current occupant of the White House is very much he's very much concentrated on companies and moving and manufacturing businesses onshore to the US? He doesn't seem to spend much time talking about funds and financial flow. So in a way, you haven't been in the news in that sense.
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Chapter 7: What does the future hold for Ireland's ETF industry?
firms, it means that this is part of actually a surplus that the United States has with Ireland. So that's a positive part of that trade discussion. Because a large part of the investable universe, be it of companies, et cetera, based in the States, significant amounts of the monies that are invested through Irish funds by people from all over the world find their way back into the U.S.
So as a part of the strategic conversation globally, this is a very, very pivotal industry.
Now, as we finish up 2025, what does next year look like? Can we go up another few notches next year in the funds world? Or is there sort of a period of plateauing ahead?
So we believe that the underlying demand for what we do will grow.
Our ability to grow is very simply a factor of whether we have the product offerings, not only in publicly quoted investments, but in private market investments, whether the new technologies that will underpin how people invest tomorrow, like tokenization, that we are able to do them, to do them effectively, to do them in an agile way. And that's very much our focus.
Next year is on the competitiveness in its fullest sense of Ireland's offering.
And that's internal as well, because I do see when I look through, which I am paid to do, look through CSO figures, I do see salary escalation in financial services generally. And I don't know how much of that is funds, but I mean, certainly there's a lot of pay going through the books that must at least a little bit eat away at your competitiveness.
So that's why when we focus on things like how we use the great human skill and individual skill that exists around the country and match that with technology, which is why you're seeing many of the firms that we represent, our 150 firms from around the country, they're investing very heavily in matching the best of their human skill and expertise with the best of technology to make sure that we can be scalable, efficient, timely, trusted, all of the things that you would want and expect.
Well, listen, well done. It's nice to end the year on a high note. Not everyone in every sector is in that position. For the moment, thank you for the update. Pat Lerner is the Chief Executive of Irish Funds. And up next, we'll be looking at the cost of pay across the retail sector.
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