Why Dublin may become Asia's Ucits domicile of choice

Dublin may have stolen a march on Luxembourg in the battle to become Asian fund managers' European domicile of choice, particularly Chinese players, after the Irish Funds Industry Association (IFIA) unveiled plans to open a rep office in Hong Kong.

The announcement, in partnership with the Irish Chamber of Commerce of Hong Kong, was made on the sidelines of the Fund Forum Asia conference in Hong Kong this week by IFIA chief executive Pat Lardner.

The IFIA has not given a date when the rep office -- to be headed by Conor O’Mara, chairman of the Irish Chamber Commerce of Hong Kong -- will become operational.

It will be the IFIA's third rep office in the region after Singapore and Tokyo, although it comes over a year after the Association of the Luxembourg Fund Industry opened its rep office in the city, in late 2010. 

But Stewart Aldcroft, who advises clients on setting up and domiciling funds in both Luxembourg and Dublin for Citi's securities and fund services division, points out that the time and cost needed for listing a Ucits fund in Dublin is more efficient than it is in Luxembourg. 

This, he suggests, makes it an attractive proposition, particularly to Chinese fund managers preparing to set up Ucits funds in Europe which are smaller in size and new to the market.

“You need a fund size of over $100 million to make Luxembourg a viable proposition, and it takes a time-frame of three to four months for a Ucits structure to be successfully set up there," notes Aldcroft. 

"Dublin, on the other hand, has half of those requirements. For mainland Chinese managers wanting to set up Ucits products to access the European market it all comes down to speed…and cost." 

While Dublin has established itself as a domicile for funds under the Ucits (Undertakings for Collective Investment in Transferable Securities) structure, successfully attracting second- or third-tier US fund managers, for example, industry players note that the city's funds industry is also more geared towards alternatives such as hedge funds.

“Over the years Luxembourg's fund industry has developed more towards retail fund products, with classic Ucits long-only, whereas Ireland has an industry that is historically oriented more towards alternatives and hedge funds," states Stéphane Karolczuk, head of Arendt & Medernach’s rep office in Hong Kong, who advises Asia-Pacific clients on legal and regulatory issues related to domiciling investment funds in Luxembourg. "I believe that Ireland is trying to balance that by attracting more fund managers who use the Ucits fund vehicle.”

Ken Owens, IFIA chairman, says the association wants to have a presence in all key Asian markets to highlight that “Ireland is the best domicile to offer distribution services due to its 20-plus years of experience and robust regulatory environment”.

The Irish funds industry supports the distribution of Irish Ucits funds to investors in over 70 countries, and the IFIA claims the country attracted “twice as much in new Ucits monies as all other European domiciles put together in 2011”, although it did not specify figures.