How to establish an alternative investment fund in Ireland
How to establish an alternative investment fund in Ireland
Stephen Hickey, Head of AIFM Services - Ireland, outlines the benefits of establishing a fund in Ireland and how a transparent, streamlined process helps funds get to market as efficiently as possible.
Ireland is widely recognised as one of the world’s leading fund domiciles, and is primarily known for its strength in both UCITS and alternative investment funds (AIFs). Indeed, the country was the first European jurisdiction to offer a regulated AIF product – the Irish Qualifying Investor Alternative Investment Fund (QIAIF) – in 1990.
The attractiveness of Ireland in the funds space has seen total assets of Irish domiciled funds rise year-on-year from 2008, to stand at €3.966 trillion by November 2021. Alternatives account for just under 24% of this total – making them an almost €1 trillion market.
Most QIAIFs are established in compliance with the Alternative Investment Fund Managers Directive (AIFMD) and cover a broad range of alternative investment strategies including private equity, real estate, hedge funds, venture capital and infrastructure.
It is a market that is expected to continue growing in the years ahead, and this is perhaps unsurprising, considering the distinct benefits of establishing a QIAIF in Ireland. These include:
- Marketing into the EU. As Ireland is part of the European Union (EU), a QIAIF authorised under AIFMD can use an EU marketing passport to market to professional investors within the bloc.
- Choice of fund structures. The most common legal forms which a QIAIF take are: Irish Collective Asset-Management Vehicle (ICAV), Common Contractual Fund (CCF), Open-ended Unit Trust, Investment Company/Variable Capital Company, or Investment Limited Partnership. This gives managers the option to choose the structure which is most suitable.
- Fund redomiciliation. It is possible for investment funds established and operating in certain jurisdictions other than Ireland to re-register in Ireland.
- Speed to market. A QIAIF using the services of an AIFM can be established within 8-10 weeks. The Central Bank of Ireland (CBI) provides a 24-hour approval timeframe once the appropriate documentation has been filed.
- Favourable tax regime. QIAIFs aren’t subject to Irish taxation on either income or gains; distributions may be made to non-Irish shareholders without applying withholding taxes; wide-ranging VAT exemptions are available on services to a QIAIF (such as administration and depositary expenses); and QIAIFs may access Ireland’s double taxation treaty network with over 70 countries.
How to establish an Irish QIAIF
The Irish Government and the CBI have worked hard to ensure the funds regime in Ireland is as attractive as possible, while adhering to the highest standards. As such, they have streamlined the establishment process, which can be broken down into the following steps.
1. Choose the most suitable legal structure.
As indicated above, there are numerous structures available, all of which have specific requirements and provide distinct benefits, such as around tax treatment, risk management, and the ability to demonstrate substance.
The purpose and nature of the fund being established will typically determine the structure chosen and is a critical part of the establishment process.
2. Choose and appoint service providers.
QIAIFs tend to use a range of providers who deliver a variety of services. In some instances, one company may provide multiple services. These will range from administrators and depositaries to AIFMs, auditors and directors, and funds will need to be sure they bring on appropriate providers to ensure they are run effectively.
There are strict rules in place regarding who can provide services to AIFs, and providers must be approved in advance of fund approval. The Alternative Investment Fund Manager (AIFM), directors, investment manager/adviser, fund administrator, depositary and auditor must all be pre-cleared by the CBI. Similarly, the administrator and the depositary are required to be separate legal entities but may be part of the same economic group.
3. Gain fund approval from the regulator.
The CBI is responsible for the authorisation and supervision of all collective investment schemes, including AIFs. The authorisation process varies depending on the fund type selected and the providers being appointed as indicated above. Only when those are all in place will the fund be approved.
4. Draft necessary documentation.
Unsurprisingly, all funds require extensive, necessary paperwork to be completed. Where a management company is appointed to a QIAIF, it is required to have a Programme of Activity (POA) which sets out how it will perform a number of management functions and details the capital requirements and how these are monitored.
Similarly, there are several key documents which must be drafted by a legal adviser and filed with the CBI as part of the QIAIF approval process. These include constitutive documents (such as an instrument of incorporation where the QIAIF is established as an ICAV), a prospectus, and agreements with the AIFM, depositary and administrator.
The Irish funds regime has not only been built on the quality of its offering, but also the fact that its regulation and standards set a suitably high bar. That said, the regulator has made the establishment process straightforward so that investment managers can go about the business of attracting investment in their funds as quickly as possible.
Fund services tailored to you
Ocorian is licensed by the CBI to provide fund administration, depositary and AIFM/Manco services to AIFs in Ireland.
We can provide support throughout the entire life cycle of a fund for large-scale institutional investors, international fund promoters and investment managers across all investment structures.
Contact our team below to get the specialist fund support you need.