Industry Updates

Milestone for Ireland-domiciled ETFs as assets hit €1trn

Ireland accounts for 68% of Europe’s €1.5trn ETP market

Theo Andrew

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Assets in Ireland-domiciled ETFs topped €1trn for the first time last month as the Emerald Isle continues to assert itself as an ETF powerhouse.

ETF issuers have flocked to the country in recent years in a bid to benefit from its withholding tax treaty and expertise, with assets under management (AUM) hitting €1trn on 16 June, according to data from ETFbook, accounting for over 68% of the €1.5trn European ETF market.

Luxembourg is the next biggest home to ETFs in Europe housing €298bn assets, with the remainder spread across the continent.

At the start of 2017, there were 199 ETFs with €275bn AUM domiciled in Ireland, ahead of Luxembourg which had 146 ETFs with €103bn AUM.

Pawel Janus, co-founder and head of analytics at ETFbook, said: “Ireland and Luxembourg are two major European domiciles of choice for UCITS ETFs, with excellent expertise and experience in establishing and servicing a broad range of funds across asset classes.

“It is Ireland, however, that is clearly taking the leading position in terms of asset growth, attracting new fund promoters and hence new UCITS ETFs launches, or even mirroring the Luxembourg shelf.”

Ireland has established itself as the ETF leader due to its favourable US-Ireland tax treaty, resulting in several issuers mirroring their Luxembourg-domiciled ETFs in Dublin, or transferring them over altogether.

Earlier this month, ETF Stream revealed BNP Paribas Asset Management (BNPP AM) is set to launch Irish-domiciled iterations of its BNP Paribas Easy MSCI World ESG Filtered Min TE UCITS ETF and the BNP Paribas Easy ECPI Global ESG Infrastructure UCITS ETF.

Meanwhile, Amundi shifted its €650m Amundi MSCI World ESG Leaders Select UCITS ETF (SADW), with the potential to move five more ETFs with a total of €17bn AUM.

The favourable tax treaty sees US equity ETFs domiciled in Ireland have a 15% withholding tax rate on dividends versus 30% for ETFs in Luxembourg and other jurisdictions.

According to ETFbook, given the dividend yield on the S&P 500 is currently around 2%, choosing to domicile in Ireland will result in an annual 30 basis points of annual tax savings.

The process of gaining approval when registering an ETF is also thought to be faster in Ireland, according to Shane Coveney, partner at Dillon Eustace.

He said the process normally takes 6-8 weeks, while issuers are not required to raise €1.25m in assets in the first six months since approval, unlike Luxembourg.

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