Progress report
An assessment of hedge fund YTD performance in the face of renewed fears for a potential eurozone crash Read More
13/07/2011
Comment: Dermot Butler
During the high-flying days of the Celtic Tiger, Ireland (and Dublin in particular) started pricing itself out of the market. Indeed, at one point in time, prior to the financial meltdown, Dublin was ranked among the top three most expensive cities in the world to live in. This trend started around the turn of the century and it resulted in many of Dublin’s plethora of hedge fund administrators opening a satellite office in places such as Waterford, Galway, Monaghan and Drogheda, among others. Some Irish administrators also started looking further afield, such as Poland, outsourcing to India or, as in our case, opening up representative offices in Singapore and Chicago.
Our decision was not entirely cost based. We also wanted to establish a global footprint and this worked exceedingly well. For those who opened up branch offices in the Irish countryside, their costs were mitigated because they effectively transferred the administration from Dublin to Galway, or wherever they could carry out the work at a lower cost. For those who opened up branches or service offices further afield and outside Ireland the work transferred left Ireland for good, but the administrators were able to continue competing.
The irony is that today, two years after the 2007/9 financial markets crisis, the cost of operating in Dublin has declined substantially for new firms establishing themselves. I specifically say ‘new firms’, because no, or very little, benefit of the reduced costs has flowed through to investment managers or industry service providers who were established prior to the crisis.
One example of this unlevel playing field is office rental costs in Dublin, which have become virtually negligible for short-term start-ups, whereas the Anglo-Saxon upward-only rent review lease structure means that it is very difficult for an existing tenant to get any major reduction in rental terms. Most, if not all, existing tenants have managed to squeeze a bit, but not the 40/60% range of reductions that have affected market prices. This gives a meaningful advantage to new entrants starting their businesses in Dublin today, whether fund management firms or service providers.
Of even greater significance for a start-up are staffing costs and again in Dublin these have declined substantially in the last two years, allowing new firms to recruit staff at much lower salary levels than an established firm that hired employees prior to 2007/8. The irony imposed by European law is that an existing operation is not able to take advantage of the cut in staff salary, even though a lower salary level is now the new norm.
However, despite the ongoing concerns of some long-standing companies, Dublin has, in effect, re-established itself as a globally cost-competitive business environment, at least for new start-ups firms, and because of this I suspect that we will see a steadily increasing flow of new service providers and offices opening in the jurisdiction.
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60 seconds with... Kenneth Turchin
CAN YOU DESCRIBE YOUR CURRENT ROLE?
I have worked in public accounting and hedge funds and in the past eight years have been selling middle- and back-office services to the alternate investment industry. My role is to build relationships with clients, teach them about SS&C’s products and services, and ensure seamless transactions every time the firm launches a new fund.
IF YOU WERE DOWN TO YOUR LAST £1,000, HOW WOULD YOU INVEST IT?
I would buy THREE shares in Apple and hope for a repeat 383% return in the next five years.
WHAT WOULD YOU DO IF YOU WERE IN PRESIDENT OBAMA’S SHOES?
That’s one pair of size 12 shoes I do not want to be in!
WHO WOULD PLAY YOU IF THEY MADE A MOVIE ABOUT YOUR FIRM?
Kevin Bacon. He is a versatile actor and the centre of the entertainment universe. I am in sales. Everyone in the industry would be linked to me in six steps or less. My client list would be ridiculous.
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