Ireland's fund admin cul-de-sac?

Is Ireland's excessive focus on fund administration about to come back to bite?

Ireland's fund administrators face an invidious Catch 22. If they just chug along providing back-office services they risk losing out to cheaper or more "added value" rivals. But if they try to carve out a middle and front-office niche to attract higher paying jobs, they risk losing their reputation for back-office excellence.

Anglo Irish Bank chairman Sean Fitzpatrick has warned that Dublin's International Financial Services Centre must move from simply being a location for back-office services for funds to become a hub for asset management.

Quoted in the Irish Independent, speaking at a fund administration conference recently, Fitzpatrick warned: "We are now merely stewards of wealth, and to remain competitive we must become the creators of wealth - another London or Edinburgh."

Fund administration companies operating in Dublin currently provide back-office services for an estimated $1.9 trillion worth of assets.

There is already a move to greater provision of higher value middle-office servicing, points out Paul Nunan, managing director of Capita Financial Group in Ireland.

But, while it is important Dublin responds to changing demands, it has to be careful it does not damage the reputation for quality it has built up so carefully, he cautions.

"There are cheaper alternatives to Dublin, but Dublin is still winning its fair share of business and that's because it still has a quality reputation. If it loses that tag then it is in trouble," he says.

"We need to make sure we do not shoot ourselves in the foot by stopping being good at what we are good at," he adds.

But moving to a more fund management-based proposition need not be at the expense of fund administration, stresses Kieran Fox, director of business development at the Irish Funds Industry Association.

"It would probably be beneficial to have more of a cluster of fund management companies here.

"We do have a reputation for excellence in servicing, and that is something we would strive to maintain. But I would not necessarily imagine that would be affected if there was a flourishing fund management industry in Dublin. They are not sub-sets of one another," he adds.