FINANCIAL SERVICES
With Irish retail banks grabbing the headlines, the significant success stories in our international financial services sector can sometimes be overlooked. One such story is that of the alternative investment industry. We speak to Brian Ruane, CEO of BNY Mellon Alternative Investment Services
T view Alternative
HE Irish funds industry today services an estimated 43% of the world’s hedge fund assets (US$2.5bn), according to the IFIA (Irish Fund Industry Association). The industry employs more than 11,000 industry professionals, making it one of the world’s leading fund domiciles and service centres.
Brian Ruane is CEO of BNY Mellon Alternative Investment
Services (AIS), the alternatives investment servicing arm of financial services giantBNYMellon, which has a strong base here in Europe and in Ireland and is approachingUS$400bn in assets under administration. The really good news, says Ruane, is that the increasing preference for establishing hedge funds in more regulated jurisdictions results in Ireland (together with Luxembourg) receiving a growing share of an industry that itself is experiencing rapid expansion. Established in 2007 from the merger of Mellon Financial Corporation and The Bank of New York Company, BNYMellon is a leading asset management and securities services company. Headquartered in New York, it has US$25trn in total assets under custody and administration and US$1.17trn under management. BNY Mellon has been focused on the hedge-fund servicing business for some six years, making it a relatively recent entrant into this industry, but it is one of the fastest growing areas of BNY’s global investment servicing operation, says Ruane. “It’s an industry that has experienced significant growth over the past five years,” he says. In the period since the credit crisis, investment in hedge funds
and private equity has become more institutional, whereas the initial growth of the industry was in the main through high net- worth individuals and family offices investing in hedge funds and private equity structures, Ruane explains. The disruption in the market in 2008–2009 was characterised
by many investors pulling back from the alternatives industry. However, in 2010–2011 net inflows into the industry resumed,
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with newinstitutional investors entering the alternatives market, says Ruane. “Today it stands at about US$2.5trn – a significant increase relative to the lows it had seen during the credit crisis of about US$1.8trn.” In addition, says Ruane, new fund launch activity has resumed globally, including within Europe. Stability in the financial mar- kets, as well as clarification of the new regulatory schemes, has contributed to this activity. BNY Mellon supports the hedge fund industry globally, and
that servicing takes place in the main in New York, Bermuda, Singapore, Luxembourg and in Ireland. “Ireland is an important centre of the hedge-fund servicing business,” saysRuane. “As the industry continues to grow, Ireland continues to be the domicile of choice for many newhedge funds. Many of our product, technology and accounting experts for our global business are based in Ireland.”
Global growth So how has the global alternative investment industry withstood the credit crisis? “Globally the financial services industry has experienced a cleansing of balance sheets, as well as significant deleveraging of portfolios,” says Ruane. “Improvements in credit quality have been important. “Financial institutions are writing loans which have strict covenants and in general need to have collateral, and are higher investment grade. At the same time, many of these banks’ inter- mediaries are in the process of selling assets and the likely home for these assets is going to be in private equity and distressed debt hedge funds. “The end investors in many of these distressed hedge funds are sovereign, pension funds and endowments, due to their long- term investment horizons and their need for better return on investment. Many institutional investors globally are increasing their allocations to alternative funds, albeit under stricter due
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