• More quality recruits needed to sustain $1.2 trillion industry
• Assets under administration in Dublin have trebled since 2001
• Review of regulatory minimum activity welcomed
• IT investment required to build platform for further growth
• Hedge Funds predicted as main area of growth

Funds administration companies in Ireland will need to successfully scale their businesses in order to continue the phenomenal growth within the industry. This is the number one issue facing the $1.2 trillion industry in Ireland today, according to the 2006 Deloitte Fund Administration Survey.

Over 70 per cent of respondents identified managing internal expansion or the ability to scale the business in the light of huge growth as the biggest challenge facing the industry. Over the last five years, assets under administration (AUA) in Dublin have more than trebled to over USD1.2 trillion. This represents growth at an annualised rate of over 30 per cent.

Derek Moriarty, Financial Services Partner at Deloitte, commented: “The huge growth in the industry is clearly putting strains on businesses, particularly in relation to resource and talent management. This is exacerbated by the high attrition levels we are currently seeing within the industry. Companies are finding that they need to get staff up the learning curve quickly in order to deal with the amount of business out there. In order to address this, the industry is collaborating with third level institutions to tailor certificate and diploma courses specifically to the funds sector.”

The second and third most significant issues each identified by over 40 per cent of respondents were Business Process Redesign (BPR) and cost reduction. Business processes have evolved over the last five years and growth has been managed mainly by adding headcount. In order to manage the growth in an efficient way and also to reduce costs, fund administrators have been looking at ways to redesign the operating model through standardisation, centralisation of certain activities, automation and relocation.

Relocation initiatives to date have been ‘onshore’ to other parts of Ireland primarily to tap into a local source of labour. The funds sector has spread from Dublin to regional cities throughout Ireland such as Galway, Cork, Limerick, Kilkenny and Wexford. To reflect this, the Dublin Funds Industry Association (DFIA) has been renamed to the Irish Funds Industry Association (IFIA)!

However, global financial institutions are looking to offshore certain transactional activities to lower cost locations in the Pacific Rim or Eastern Europe. This trend is set to continue and it is for this reason that Ireland’s regulatory ‘minimum activities’ restrictions have been put firmly on the agenda.

“We believe minimum activities are inconsistent with the development of Ireland as a ‘centre of excellence’ for Fund Administration (FA).  A more sustainable basis by which to secure the future of the industry is through the promotion of Ireland as a world class location for transaction execution in fund servicing and administration. It is a welcome development that these restrictions are currently being reviewed by the Financial Regulator,” said Derek Moriarty.

IT systems also featured prominently as a major issue that needed to be addressed in order to enhance productivity and enable new products and services for customers. Current systems used by respondents are relatively old, with over 25 per cent over ten years old and 50 per cent over five years old. With 25 per cent of respondents dissatisfied with the functional and technical capabilities, 30 per cent dissatisfied with the potential of their current system and 50 per cent dissatisfied with the pricing, it is not surprising that 50 per cent plan to change or upgrade their IT system in the next 12 to 18 months.

“Clearly, all of the key issues are related to growth and the need to contain costs in an increasingly competitive environment,” said Derek Moriarty. “After such a period of growth, the industry is experiencing some growing pains. This survey shows that the industry is aware of the challenges and, more importantly, actively planning structural changes to take the industry to the next level.”

Reflecting this confidence, when predicting the future growth areas in the industry, 60 per cent of survey respondents believe that hedge funds and 20 per cent of respondents believe that funds of hedge funds will be the main growth areas in the next three to five years. Private equity funds and money market funds were also mentioned as strong growth prospects reflecting a more sophisticated investment market in Europe.

View the full results here

Ends

Notes to editors

About the research

Deloitte surveyed companies which currently service $810 billion of assets under administration (AUA) in Ireland or 70 per cent of the total industry.

About Deloitte

In Ireland, Deloitte is among the nation’s leading professional service firms, providing audit, tax, consulting and financial advisory services through nearly 875 people in Dublin, Cork and Limerick. Known as an employer of choice for innovative human resources programmes, it is dedicated to helping its clients and its people excel. “Deloitte” refers to Deloitte & Touche and any associated partnerships and companies established under the laws of Ireland. Deloitte is the Irish member firm of Deloitte Touche Tohmatsu. For more information, please visit the Irish member firm’s website at www.deloitte.com/ie.

Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms, and their respective subsidiaries and affiliates. Deloitte Touche Tohmatsu is an organization of member firms around the world devoted to excellence in providing professional services and advice, focused on client service through a global strategy executed locally in nearly 150 countries. With access to the deep intellectual capital of approximately 135,000 people worldwide, Deloitte delivers services in four professional areas—audit, tax, consulting and financial advisory services—and serves more than one-half of the world’s largest companies, as well as large national enterprises, public institutions, locally important clients, and successful, fast-growing global growth companies. Services are not provided by the Deloitte Touche Tohmatsu Verein, and, for regulatory and other reasons, certain member firms do not provide services in all four professional areas.

As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each other’s acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names “Deloitte”, “Deloitte & Touche”, “Deloitte Touche Tohmatsu”, or other related names.