{"id":12832,"date":"2022-08-10T19:32:01","date_gmt":"2022-08-10T19:32:01","guid":{"rendered":"http:\/\/legalblog.ie\/?p=12832"},"modified":"2024-02-17T10:16:15","modified_gmt":"2024-02-17T10:16:15","slug":"special-aifs-2014","status":"publish","type":"post","link":"https:\/\/legalblog.ie\/special-aifs-2014\/","title":{"rendered":"Special AIFs"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_63 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/legalblog.ie\/special-aifs-2014\/#Money_Market_Funds\" title=\"Money Market Funds\">Money Market Funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/legalblog.ie\/special-aifs-2014\/#Short_Tern_Other_Money_Markets\" title=\"Short Tern &amp; Other Money Markets\">Short Tern &amp; Other Money Markets<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/legalblog.ie\/special-aifs-2014\/#Real_Estate_Retail_Investor_Funds\" title=\"Real Estate Retail Investor Funds\">Real Estate Retail Investor Funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/legalblog.ie\/special-aifs-2014\/#Investing_in_Other_Funds\" title=\"Investing in Other Funds\">Investing in Other Funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/legalblog.ie\/special-aifs-2014\/#Closed_End_Funds\" title=\"Closed End Funds\">Closed End Funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/legalblog.ie\/special-aifs-2014\/#Changes_to_Investment_Policy\" title=\"Changes to Investment Policy\">Changes to Investment Policy<\/a><\/li><\/ul><\/nav><\/div>\n<h3><span class=\"ez-toc-section\" id=\"Money_Market_Funds\"><\/span>Money Market Funds<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Money market retail funds must indicate whether they are short-term funds or money market funds.\u00a0 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.<\/p>\n<p>It must provide appropriate information to unit holders on the risk and reward profile of the fund to enable the identification of risks relating to the investment strategy.<\/p>\n<p>Where the fund is a Money Market Fund, it may only invest in a Short-Term Money Market Fund or Money Market Fund. It must have a fluctuating net asset value.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Short_Tern_Other_Money_Markets\"><\/span>Short Tern &amp; Other Money Markets<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>A Short-Term Money Market Fund must have the primary objective of managing the principal of the fund and aim to provide a return in line with money market returns.\u00a0 It must limit investments to high quality money market instruments as determined by the fund and deposits with credit institutions.\u00a0 There were criteria in respect of high quality.<\/p>\n<p>A Short-Term Money Market Fund must limit investments to securities or investments with a legal redemption date of less than 397 days.\u00a0 There must be provision for daily net asset value and daily price calculations on subscription and redemption of units. <strong>\u00a0<\/strong>A Short-Term Money Market Fund must ensure that WAL does not exceed 120 days.<\/p>\n<p>There are further specific provisions regarding exposure to equities and commodities, including through financial derivatives.\u00a0 Financial derivative instruments may only be used where they are in line with the money market investment strategy of the fund.<\/p>\n<p>There are requirements for other classes of Money Market Funds.\u00a0 The primary investment objective must be that of providing a return in line with money market rates.\u00a0 It shall limit its investment to high quality money market instruments as determined by the fund and deposits with credit institutions.\u00a0 There are criteria regarding the determination of high quality.<\/p>\n<p>There are similar provisions to those above.\u00a0 There are provisions in respect of exposure directly or indirectly to equities and commodities, including financial derivative instruments.\u00a0 Derivatives may only be used which give exposure to foreign exchange for hedging purposes.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Real_Estate_Retail_Investor_Funds\"><\/span>Real Estate Retail Investor Funds<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>A Retail Investor Fund shall only acquire real estate where the interest has been valued in advance.\u00a0 It must be contained in a report that must confirm that if the real estate was acquired, it could be disposed of at that valuation within a reasonable period.\u00a0 The asset must be acquired within six months of the date of the report and within 5% of the valuation price.<\/p>\n<p>A Retail AIF may only trade in real estate and related assets on a market which is provided for in its constitutional document.\u00a0 Up to 20% of net assets may consist of real estate which are not so traded, provided the assets are acquired in the same conditions as above.<\/p>\n<p>A real estate investor fund may not invest more than 30% of its net assets in a single real estate interest.\u00a0 It may invest more than 25% of its assets in vacant interests or which are in the process of development or requiring development. \u00a0It shall not invest more than 25% of its net assets in assets subject to a mortgage.\u00a0 This does not affect the ability of the fund to secure its borrowing generally on the real estate interest of the scheme.\u00a0 The outstanding amount of the mortgage must not represent more than 50% of the value of the fund. \u00a0The fund may not grant any person an option to acquire any property included in it.<\/p>\n<p>The prospectus shall contain a description of the risks involved in this type of fund, including the risks associated with investing in leasehold interests with a duration of less than 70 years.\u00a0 The prospectus must contain a prominent note of the risk with reference to real estate, which may cause difficulties in meeting redemption.\u00a0 It must provide details of any minimum size to be achieved during the initial period in order for the fund to be feasible and information on procedure in the event that the maximum is not reached.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Investing_in_Other_Funds\"><\/span>Investing in Other Funds<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>There are specific requirements in respect of funds of unregulated funds Retail Investor Funds.\u00a0 Where a fund invests more than 20% in unregulated investment funds, including investments in hedge funds and other alternative investments, it must comply with specific requirements.<\/p>\n<p>There is a requirement that not less than 20% of the net assets may be invested in any one unregulated fund.\u00a0 The underlying investments must be subject to independent audit and in accordance with Generally Accepted Accounting Principles. There must be arrangements in place that assets are held by an independent entity, which is independent of the management company.<\/p>\n<p>The management must demonstrate appropriate experience in relation to alternative investment funds.\u00a0 The Central Bank must be satisfied that there are appropriate controls and systems in place to monitor constantly the activities of the underlying investment fund.<\/p>\n<p>When more than 40% of net assets are invested in funds managed by the same management company or associates, the quarterly report must be made to the Central Bank as to the extent to which the underlying investments are diversified between trading strategies.<\/p>\n<p>The fund shall not invest in units in an investment fund which itself invests more than 30% of net assets in other investment funds.\u00a0 There are limited exceptions.<\/p>\n<p>Where the fund is open-ended, it shall provide at least one dealing day per month.\u00a0 The maximum number of interval between submission of a redemption request and payment shall not exceed 95 days.<\/p>\n<p>The fund may retain up to 10% of redemption proceeds until such time as the redemption proceeds and the underlying investment fund is received.<\/p>\n<p>Certain risk warnings must appear in bold on the prospectus and application form.\u00a0 In particular, they must warn of the unregulated status of underlying investments.\u00a0 They must point out that it is not suitable for all unit holders and recommend specific financial advice be taken.<\/p>\n<p>There are specific provisions to be set out in the prospectus in relation to certain matters, including investment policies, leverage, impact of fees, cumulative effect of performance fees, potential valuation and liquidity problems.<\/p>\n<p>The prospectus must describe diversification policies.\u00a0 If they invest in funds with a lock-up period, they must not reflect the redemption arrangements provided for in the prospectus.\u00a0 The intention to so invest must be disclosed.<\/p>\n<p>Periodic reports must be made of the lists of the names of the underlying funds, their management companies and domicile.<\/p>\n<p>There are specific requirements with respect to retail investment funds, which invest more than 30% of their net assets in other investment funds, and with respect to guaranteed Retail Investor Funds, AIFs.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Closed_End_Funds\"><\/span>Closed End Funds<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>There are provisions in relation to closed-end funds.\u00a0\u00a0 They must provide for redemption. Where there is a finite closed-end period, it may be up to 10 years, if reasonably required by the objective or more than 10 years, where it can make realistic provision for liquidity and redemption on an ongoing basis by unitholders who wish to redeem.<\/p>\n<p>A retail investor fund which is closed-end must provide for a specific wind up, redemption of all units or alternatively conversion into an open-ended fund or with approval extension of the relevant period in its constitutional documents.<\/p>\n<p>Where there are liquidity provisions in a closed-ended fund, they must realistically contribute to the ability of the unitholder to realise his investment before the period ends.<\/p>\n<p>There are provisions in relation to changes in the duration of the closed-end fund.\u00a0 Approval of 75% majority of investors is required.\u00a0 There are provisions where there is a change in the duration of the fund, with an opportunity for investors to redeem or otherwise exit. There must be 50% vote for a change.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Changes_to_Investment_Policy\"><\/span>Changes to Investment Policy<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Where there is a proposed change of investment objectives or material change of investment policies with no opportunities for unit holders to redeem or otherwise exit the fund, there must be a 75% vote.\u00a0 Where there is a realistic opportunity for unitholders to redeem with a proposed change in objective, a 50% majority suffices.<\/p>\n<p>Where non-material changes to investment policy are made, they must be notified to the unit holder.\u00a0 Where proposals are made to amend the maximum redemption charge as disclosed in the constitutional documents or the maximum annual fee, following provisions must be adopted.\u00a0 Where there is a proposed increase in the fee or charges with no opportunity for redemption holders to redeem, a 75% majority is required, otherwise 50%.<\/p>\n<!--themify_builder_content-->\n<div id=\"themify_builder_content-12832\" data-postid=\"12832\" class=\"themify_builder_content themify_builder_content-12832 themify_builder tf_clear\">\n    <\/div>\n<!--\/themify_builder_content-->\n","protected":false},"excerpt":{"rendered":"<p>Money Market Funds Money market retail funds must indicate whether they are short-term funds or money market funds.\u00a0 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 [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[167],"tags":[],"_links":{"self":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/12832"}],"collection":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/comments?post=12832"}],"version-history":[{"count":5,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/12832\/revisions"}],"predecessor-version":[{"id":31912,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/12832\/revisions\/31912"}],"wp:attachment":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/media?parent=12832"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/categories?post=12832"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/tags?post=12832"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}