Investment Funds

Introduction An Investment Limited Partnership (ILP) is a regulated common law partnership structure. ILPs are tailored specifically for investment in a collective investment fund, one of five such investment fund vehicles in Ireland. An ILP is formed under the Investment Limited Partnership Act 1994 and established on receiving authorisation by the Central Bank of Ireland (Central Bank). An ILP is constituted according to the limited […]

Notices The Central Bank publishes notes applicable to the regulation of mutual funds.  There are distinct notices in respect of the UCITS funds and non-UCITS funds.  In broad terms, non-UCITS funds are domestic-facing funds.  UCITS funds are those which may be marketed to the European Union and are established under EU wide regulations. The NU notices (Non-UCITS notices) applied to collective investment schemes irrespective of […]

General Funds are constituted worldwide.  Some jurisdictions, particularly those offering favourable tax status, are particularly attractive for funds. The legal structure of a fund is determined to an extent by the relevant statutory provisions of the jurisdiction of the establishment.  Regulatory considerations are relevant. It may be possible to list the fund on an exchange, as is the case in Ireland.  In some cases, only […]

Unregulated Funds Some arrangements may not be subject to domestic funds legislation because they do not fall within the definition of a fund, although they might be referred to as such.  Other entities may fall within the definition of a fund. but may enjoy an exemption. The exemptions are commonly granted to funds with a small number of investors which are not promoted to the […]

Fund Manager The fund manager manages the funds in accordance with the relevant provisions incorporated in the memorandum and articles of association, trust deed or other constitutional document.  It is responsible for the funds’ operation. It has quasi fiduciary obligations. The fund manager makes the requisite investment decisions advised by the investment manager or advisor.  It undertakes purchases and sales of units in the fund […]

Overview Funds are established under various types of constitutional documents.  Constitutional documents may be the Memorandum and Articles of Association of an open or closed-end company.  It may be a trust deed, contractual arrangement or partnership agreement. Operating agreements would be entered between the trustees and manager or the fund and manager.  Agreements will be entered between the company and a custodian.  Third-party agreements will […]

Collective Investment Schemes A collective investment scheme whose principal object is an investment in another single collective investment scheme is subject to the following rules in addition to general rules, which are not dis-applied below. The underlying schemes must be authorised in Ireland or in other jurisdiction recognised by the Central Bank as providing equivalent investor protection.  The prospectus must contain sufficient information in relation […]

Special Listing Rules There are special stock exchange rules in respect of collective investment schemes.   They are in addition to the central bank rules governing the same. The applicant must be duly incorporated and established.  It must operate in accordance with its constitutional document.  It must invest and manage its assets in such a way that it is consistent with the object of spreading investment […]

An AIFM must at all times act honestly, with due care and diligence and fairly in conducting its activities. The following obligations apply to AIFMs (alternative investment fund managers). It must act in the best interests of each AIF or its investors which it manages and the integrity of the market.  It must have and employ effectively the resources and procedures necessary for the proper […]

AIF Directive The Alternative Investment Fund Managers Directive came into force in July 2013.  It followed in the wake of the 2008 financial crisis and the perception of insufficient regulation. The Directive provides for a uniform set of rules for all managers of alternative investment funds, including private equity funds and venture capital funds.  These had previously been largely unregulated. The Directive applies to fund […]

ISD & MiFID The Investment Services Directive was given force in Ireland by the Investment Intermediaries Act 1995. The Act still applies to a limited number of entities. The Prudential Handbook for Investment Firms applies to investment business firms authorised by the Central Bank under that Act. It does not apply to funds which are authorised by the MiFID Regulations. Authorisation under the MiFID Regulations […]

Types of Fund There were two broad types of investment funds in Ireland, UCITS and AIF. There are five types of legal structures: unit trust, contractual fund, investment limited partnership, investment company and Irish Collective Asset Management Vehicle. Service Provider The Central Bank authorises funds. It requires the appointment of an administrator, Irish-based depository/custodian; management company (Unit Trust and CCFs); Alternative Investment Fund Manager, where […]

Subscriptions A Qualifying Investor AIF shall have a minimum subscription of €100,000 or other equivalent in another currency.  It shall not accept subscriptions from persons or groups amounts of less than this for individual investors. The fund may only accept subscriptions from investors who are professional clients within the meaning of the MiFID Directive; receives an appraisal from a credit institution, a MiFID firm or […]

Overview Funds may be constituted as a unit trust, a common contractual fund, a company (2015 Act) or an investment limited partnership.  It may be authorized by the Central Bank as a UCITS or alternative investment fund. A UCITS fund may be sold to the public.  There are, accordingly, significant restrictions on investment and borrowing. The alternative investment fund is a collective investment undertaking which […]

Prospectus A QIAIF must publish a prospectus and keep its essential elements up to date.  It must contain sufficient information for investors to make an informed judgment on the investment proposed. It must be offered free of charge to every prospective unit holder before the contract for the acquisition of units is entered. The fund must ensure where the prospectus is translated into a language […]

Part 24 Companies Act Part 24 of the Companies Act 2014 applies to investment companies. It reenacts the Companies Act 1990 which provided for companies with variable capital for the purpose of acting as funds. See generally the sections on funds and the various types of entities which may be vehicles for use as funds. An investment company is a public limited company, the sole […]

Subscription Conditions A Qualifying Investor AIF shall have a minimum subscription of €100,000 or other equivalent in another currency.  It shall not accept subscriptions from persons or groups amounts of less than this for individual investors. The fund may only accept subscriptions from investors whois  a professional clients within the meaning of the MiFID Directive; receives an appraisal from a credit institution, a MiFID firm […]

Prospectus Requirements A Retail AIF must publish a prospectus which must be dated.  The essential elements must be kept up to date.  It must contain sufficient information for investors to make an informed judgment of the investment proposal to them. The statutory obligations in respect of disclosures to unitholders apply.  See the separate sections on the AIFM regulations.  The information set out in the regulations […]

Qualifying Investors The rules in the rulebook apply to all qualifying AIFs.  However, the definitive rules are set out in their letter of authorisation. A Qualifying Investor AIF shall have a minimum subscription of €100,000 or equivalent in other currencies.  It shall not accept subscriptions from persons for amounts of less than €100,000 for individual investors. It shall only accept subscriptions from an investor who […]

Funds AIFs and qualifying investor AIFs may be established as unit trusts, designated investment companies under the Companies Act 1990, Investment limited partnerships under the Investment Limited Partnership Act 1994 or common contractual funds under the Investment Funds Act 2005. The conditions for approval of AIFs are set out in the AIF rulebook, which supersedes the requirements of the non-UCITS notices for new funds. Retail […]

Money Market Funds Non-UCITS collective investment schemes, money market schemes, and schemes that label or market itself as a money market must comply with the following requirements.  It must classify itself as a “Short-Term Money Market Fund” or a “Money Market Fund”. The scheme must indicate in its prospectus whether it is a Short-Term Money Market Fund or a Money Market Fund.  It must also […]

General Investment Restrictions General investment restrictions are applicable to non-UCIT schemes.  The following applies to all UCIT schemes except where dis-applied by schemes, by notices relating to schemes with specific investment and/or marketing objectives.  Schemes may derogate from the investment restrictions for six months following the date of their launch, provided they adhere to the principle of risk sharing. The investment objectives and policies of […]

Management Company A non-UCIT management company administration company or trustee company must have minimum capital and report to the Central Bank periodically.  The initial minimum capital requirement is around €125,000.  The requirement is calculated as one-quarter of the firm’s total expenditure from its most recent account.  The minimum capital requirement is the higher of the expenditure requirement or the initial capital requirement. A firm must […]

Publication & Dissemination The fund must publish a prospectus and its essential elements must be kept up-to-date.  It must contain sufficient information to allow investors to make an informed judgment of the investment proposal.  It must comply with the provisions of the regulations regarding disclosure to the unit holders. The prospectus must be offered free of charge to every prospective unit holder before a contract […]

Money Market Funds Money market retail funds must indicate whether they are short-term funds or money market funds.  It must contain certain warnings drawing attention to the difference between the nature of a deposit and the nature of an investment in a money market fund with reference to the risk that the principal invested in the money market fund is capable of fluctuation. It must […]

2014 Rulebook The rulebook published by the Central Bank in September 2014  provides for requirements applicable generally to retail investor AIFs.  There are specific requirements for particular types of funds relevant to the class of assets involved. There are extensive provisions dealing with qualified investor AIF requirements together with fund-specific requirements.  There are general requirements in respect of AIF fund managers, AIF management companies, AIF […]

Suitability / Knowing the Consumer I A regulated lender is obliged to gather and record sufficient information to enable it to make a proper recommendation for a product or service. This does not apply where the consumer specifies the product and product provider and has not received advice. The regulated lender must gather details of material changes to the consumer’s circumstances before it provides a […]