Ireland has established itself as a leading global hub for fund administration and management, attracting investors and fund managers from around the world. With its robust regulatory framework, skilled workforce, and favourable tax environment, Ireland offers an ideal jurisdiction for setting up a fund.
In this article, we will provide an overview of the two main fund structures in Ireland: Alternative Investment Funds (AIFs) and Undertakings for Collective Investment in Transferable Securities (UCITS). Whether you are an experienced fund manager or a first-time investor, this guide will help you navigate the process of establishing a fund in Ireland.
Choose a Fund Structure: AIF or UCITS
There are a number of factors to consider when making this decision including the location of target investors and the investment policy of the fund.
1. Alternative Investment Funds (AIFs):
Alternative Investment Funds (AIFs) are investment vehicles that pool capital from multiple investors to invest in a diverse range of assets. AIFs are regulated under the Alternative Investment Fund Managers Directive (AIFMD) and offer flexibility in terms of investment strategies and asset classes. Some key features of AIFs include:
a. Legal Structure: AIFs can be structured as investment companies, unit trusts, or limited partnerships. The choice of structure depends on the specific requirements of the fund and the preferences of the fund manager.
b. Regulatory Requirements: AIFs must appoint an authorized Alternative Investment Fund Manager (AIFM) to oversee the fund’s operations and comply with regulatory obligations. The AIFM is responsible for risk management, valuation, and reporting.
c. Investor Eligibility: AIFs are typically targeted at professional investors, including institutional investors, high-net-worth individuals, and sophisticated investors. However, certain AIFs may also be marketed to retail investors, subject to specific regulatory requirements.
2. Undertakings for Collective Investment in Transferable Securities (UCITS):
UCITS are investment funds that comply with the European Union’s UCITS Directive, which aims to harmonize fund regulations across member states. UCITS funds are widely recognized for their high level of investor protection and are suitable for retail investors. Here are some key aspects of UCITS funds:
a. Investment Restrictions: UCITS funds have specific investment restrictions to ensure diversification and risk management. These include limits on exposure to individual issuers, concentration limits, and restrictions on the use of derivatives.
b. Liquidity and Transparency: UCITS funds must provide regular and detailed reporting to investors, including net asset value (NAV) calculations and periodic financial statements. They also have strict liquidity requirements to ensure investors can redeem their investments at regular intervals.
c. Investor Protection: UCITS funds are subject to stringent regulations to protect the interests of retail investors. These regulations cover areas such as disclosure requirements, custody of assets, and the appointment of a depositary to safeguard investors’ assets.
Choose a Legal Structure
UCITS are open-ended funds and may be established as a Unit Trust, ICAV, Common Contractual Fund (CCF) or Variable or Fixed Capital Companies.
AIFs can be established as a Unit Trust, ICAV, Common Contractual Fund (CCF), Investment Company or Investment Limited Partnerships.
Setting up a fund in Ireland offers numerous advantages, including a well-established regulatory framework, a skilled workforce, and access to a global network of investors. Whether you opt for an Alternative Investment Fund (AIF) or an Undertaking for Collective Investment in Transferable Securities (UCITS), Ireland provides a conducive environment for fund managers and investors alike.
By understanding each structure’s key features and regulatory requirements, you can make an informed decision that aligns with your investment objectives.
Approval by the Regulator in Ireland (CBI)
The Central Bank of Ireland (CBI) is responsible for the authorisation and supervision of all collective investment schemes (i.e. both UCITS and AIFs). The authorisation process varies depending on the fund type selected.
For Both UCITS and AIFs. For all Irish funds the following service providers must be approved in advance of fund approval:
- An Irish based depository
- An Irish based administrator
- An Irish regulated external auditor
- A management company (Unit Trust and CCF)
- UCITS Manco / AIFM
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