75% of firms expect revenue growth of 20% plus next year

Nine out of ten say little or no short-term impact from credit crisis

Following the significant growth in the funds industry in Ireland over the last year, which saw assets under administration grow by 35% to $1.6 trillion, three out of four funds administration companies in Ireland expect revenue growth levels to exceed 20% in 2008, according to the 2007 Deloitte Fund Administration Survey. As a result of this Deloitte expect assets under administration to reach $2 trillion by year end 2008.

The survey reveals that there is great optimism for the future growth of the industry in Ireland. No less than 75% of survey respondents expect revenue growth to exceed 20% in the current year.  When asked on the impact of the credit crisis, 90% of respondents think there will be little or no impact in the short term and 95% see little or no long-term impact.

The growth has come from a variety of sources, with hedge funds being the main driver, along with UCITS and Non–UCITS funds. However, a newcomer this year was the growth of private equity servicing, with over 40% of respondents placing private equity funds in their top three growth areas.

The survey has also identified the main challenges facing the industry against this backdrop of phenomenal growth. Cost containment and productivity was identified as the number one issue facing administrators - 75% of respondents identified this as a major challenge.

Brian Forrester, Financial Services Partner at Deloitte, commented: “Quite simply, the funds industry is the biggest success story since the inception of the IFSC and the industry expects that growth to continue. This success does however create challenges for the industry, the major one identified being the need to reduce costs, while at the same time increasing productivity. Fund administrators will have to look at Business Process Redesign initiatives which look at process standardisation, staff training and regionalisation, automation and offshoring in order to address this.”

Managing growth was the second most significant issue identified. This was the top issue in last year’s survey. Some 70% said managing internal expansion or the ability to scale the business in response to the phenomenal growth in recent years is putting large strains on administrators, specifically in relation to resource/talent management and operational gearing. This is reflected in the increase in the number of personnel servicing each fund – with 80% of administrators reporting an increase in the number of personnel per fund. The resulting squeezing of the available workforce exposes the Irish funds market to the threat posed by other jurisdictions.

“To address this gearing issue, the vast majority of respondents said that regionalisation and off-shoring will be high on the agenda in order to cope with the demand, and some 72% of respondents expressed a desire to move towards a Global Operating Model. To achieve this will require the financial regulator to consider the issue of minimum activities, which continues to be the main regulatory issue facing the industry,” said Brian Forrester.

A number of fund administrators have already opened offshore centres such as Krakow in Poland and Bangalore in India. Regionalisation has been a key feature over the past 2-3 years with fund administrators opening operations in Cork, Kilkenny, Limerick, Galway, Dundalk, Waterford and Newry to tap into local labour pools.

“This year’s survey once again shows that fund administrators are coming under pressure to maintain the level of service they provide. As the administration industry matures, the operating models needed to support the industry need to keep pace with this development.  Respondents noted concerns around the ability to recruit appropriate level resources, and to maintain them, with the inflationary wage pressure making it attractive for staff to move between firms.

“The funds industry now needs to adapt to this new stage in its life cycle in Ireland. The positive thing is that the industry knows where the challenges lie and is making progress in addressing them. We are confident that this is an area that can continue to grow significantly within Ireland’s financial services industry,” concluded Forrester.

A copy of the survey can be found at www.deloitte.com/ie.

Ends

Notes to editors

About the research

In 2006 Deloitte carried out a survey of the Fund Administration community in Ireland, in order to obtain an understanding of the key business issues facing the industry. Deloitte have carried out the survey again in 2007 in order to obtain an up to date perspective on how issues identified in 2006 have been dealt with over the course of the year, and to determine if any additional issues have arisen. The survey was carried out in October 2007. We had responses from 25 companies providing fund administration services. The respondent Fund Administrators currently service $1.3 trillion of assets which represents approximately 80% of the total industry in Ireland.

About Deloitte

In Ireland, Deloitte is among the nation’s leading professional service firms, providing audit, tax, consulting and financial advisory services through more than 1,000 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.

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