Dublin has established itself over the last decade as an important European center for servicing offshore mutual funds.

Eager to attract financial-services jobs to its shores, the Irish government offers tax exemption to offshore funds domiciled in its capital.

Acting under the principle, "If you build it, they will come," the government built an international financial services center in 1987 in an attempt to lure foreign financial institutions.

Two years later, Ireland adopted the European Undertaking for Collective Investment In Transferable Securities (UCITS) directive, which allows companies to set up a fund in one European jurisdiction and market across borders in the European Economic Community. The country did not previously have much history in financial services.

Now, roughly 1,200 employees work in fund servicing out of a total of about 4,000 working in financial services.

According to figures for the first six months of 1997-the latest available-roughly $45.5 billion of assets are domiciled in Dublin, including approximately $16 billion in mutual funds. A further $35.75 billion of non-Irish-based assets are administered in the city.

Several U.S. banks are among the institutions servicing funds in Ireland. Bank of New York has a strategic alliance with Allied Irish Banks PLC, while State Street has a partnership with one of the country's other big banks, Bank of Ireland. Others like Citibank and Chase Manhattan - both of which already had banking presences in Ireland-have chosen to go out on their own.

While Dublin still lags Luxembourg-Europe's biggest offshore location with $400 billion in assets including $127 billion in mutual funds- participants point out that the city is closing the gap.

They point out that Luxembourg has a head start, since the country has been involved in the fund business for some 20 years and adopted the UCITS directive in the mid-eighties.

Dublin has merits as a location, according to players. Not least is the tax exemption for funds, said Denis P. Murphy, a chief manager with Allied Irish Banks. Certain funds registered in Luxembourg charge a tax of two to six basis points, said Mr. Murphy.

"I think people realize that Luxembourg and Dublin are involved in two different types of business," said David Lawless, a partner in Coopers & Lybrand's tax division in Dublin.

Luxembourg is better at servicing retail funds, while Dublin has predominantly focused on the institutional sector, which makes up 70% to 75% of its business, said Mr. Lawless.

A more flexible regulatory environment allows Dublin to handle the demanding nature of institutional clients, he said. Mr. Lawless noted, however, that several players are considering building the retail fund area.

"If you're dealing with mainland Europe, Luxembourg is perceived to be better," said Bernard Hanratty, a vice president for offshore fund services at Citibank's Dublin office. Luxembourg is a "truly multilingual" society, said Mr. Hanratty. However, institutions based in Dublin have also been successful in distributing funds throughout the rest of Europe, he noted.

Some institutions have chosen to be in both places, among them Citibank, State Street, and Chase.

The desire to be in both cities is prompted by the need to go where your clients want to go, said Coopers & Lybrand's Mr. Lawless.

"If you have a relationship with someone who wants to go to Dublin and you're not there, the danger is, they might go there anyway," said Mr. Lawless.

But Dublin is working hard at making the city an attractive location to companies scouting offshore locations, said Eimear Cowhey, chairman of the Dublin Funds Industry Association and a director at GT Global.

The association was set up in 1991 and represents custodian banks, administrators, and accounting, brokerage, and law firms involved in fund services. GT services roughly $4 billion in funds from Dublin, with most of those funds domiciled there, said Ms. Cowhey.

Ms. Cowhey points out that funds are attracted by the high number of college graduates, by the fact that English is the spoken tongue, and by an increased emphasis on foreign languages.

Companies in Dublin have also made special concessions in order to be able to service the U.S. fund market, she said.

"For servicing American funds, it's recognized that we have to work the American day," she said. "So there's a lot of shift work being done," she added.

Other factors in Ireland's favor include its "small but positive economy," said Allied Irish Bank's Mr. Murphy. That bank's alliance with Bank of New York serves a number of U.S. companies, Mr. Murphy said. Established in 1994, the relationship services $8 billion of assets under administration and boasts about 100 customers, including names like J.P. Morgan & Co., Federated Investors, and Goldman Sachs, said Mr. Murphy.

Citibank, meanwhile, numbers Cargill Investment Services, Inc. and Salomon Investment Advisors among its clients and is a trustee to roughly 60 funds measuring $2.3 billion of assets, said Mr. Hanratty.

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