The global economic maelstrom may have sucked the life out of some of the world's best-known financial institutions, but some financial services companies in Ireland are pushing ahead with expansion plans.

Many of them are fund administrators or custodians, areas where Ireland has quietly built up expertise. The managing director of one of those companies, William Slattery of State Street International, describes it as "the single most successful economic cluster established in the Celtic Tiger era, employing 10,000 people across 30 plus firms with an extended footprint across the whole country".

Even he admits, however, that the sector is not well known here. "It's often known as back office [but] it's a very high value-added and complex activity that's poorly understood."

Slattery said the main growth businesses for companies such as his have been fund and security servicing, where Ireland has developed a very good position in an area, along with hedge funds, that has seen major growth for the last 15 years. Hedge funds are private investment vehicles that typically use aggressive investment strategies and are usually limited partnerships.

"Ireland has a strong position in servicing those markets. We have developed that expertise over time," Slattery said. "Once you have that, others go there to get that expertise. It's an English language industry which is helpful, and accountancy and third-level education is important for it, and Ireland has more third-level graduates per capita than almost any other country."

Slattery said there is no reason to think the growth in hedge funds and fund services and administration will not continue in the medium term.

"The industry is pretty resilient and has counter-cyclical elements to it that helps stability over revenue," he said. "If markets are down, foreign exchange might be strong. Lending revenue is currently strong."

Including affiliates, State Street employs 2,400 people in Ireland and plans to continue to grow the business, which will move to new offices at Sir John Rogerson's Quay in Dublin next year. Quoted on the New York Stock Ex­change, it had $15.3trn in assets under custody and $1.9trn in assets under management at the end of June.

Slattery said the Irish operation has been growing overall staff numbers despite moving some elements such as preliminary accounting and reconciliations to lower-cost jurisdictions.

As revealed in the Sunday Tribune last week, Citco, which services the alternative investment industry and is an independent provider of corporate and trust services, is to lease 76,000 square feet of new office space at Heuston South Quarter in Kilmainham in Dublin from the second quarter of next year. Citco Group companies provide corporate/ fiduciary and fund administration, banking and data processing services.

Citco has four Irish operations and has been providing international financial services from Ireland for more than 10 years from Dublin and Cork. It employs over 4,000 staff worldwide, more than 1,100 of whom are in Dublin and Cork. In 2006, according to IDA figures, the company employed more than 600 people, meaning its employment numbers have almost doubled in just two years.

The downturn has dramatically changed the industry's labour market, Slattery said, making it easier to attract and retain people in a sector that saw an annual turnover of 25% of staff between 2005 and 2007. Wages had also spiralled, Slattery said, "creating a danger that we would have done serious damage to our competitiveness."

State Street alone hired about 600 graduates, or 1.5% of all graduates from third level, in both 2006 and 2007. In total, the company recruited 900 staff here in both 2006 and 2007.

Asset management company Pioneer Investment Management oversees the asset management of €110bn from its Dublin base, employs 550 people including contractors and is now looking to sell its products in Ireland. The Irish company made a pre-tax profit of €272.3m for the year ended 31 December 2006.

State Street's Slattery believes there will be more consolidation. "You'll find people putting businesses up for sale as they want to rationalise. We are seeing a lot of that at the moment," he said, adding that State Street is on the record as looking to acquire.

Last week the company took a strategic stake in Percana, a Dublin provider of software and outsourcing services to the life and pensions industry.

It did so via International Financial Data Services (Ireland), its joint venture with US software company DST Systems.

"We did it to support it, to enable it grow rapidly. There's a good platform and good people there," Slattery said. "The support of an institutional shareholder will help growth and extend its reach broader and more deeply into the global assurance market".

Slattery warned that competition between jurisdictions for financial services investment was now "acute".