Stephen Hickey, Head of AIFM Services – Ireland, describes the benefits of setting up a fund in Ireland and how a transparent and streamlined process helps funds get to market as efficiently as possible.

Ireland is widely recognized as one of the world’s leading fund domiciles and is best known for its strength in 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.

Ireland’s attractiveness in the fund space saw the total assets of funds domiciled in Ireland increase year-on-year from 2008, to €3.966 billion. ‘by November 2021. Alternatives make up just under 24% of that total, making it almost a €1 trillion market1.

Most QIAIFs are established in accordance with the Alternative Investment Fund Managers Directive (AIFMD) and cover a wide range of alternative investment strategies, including private equity, real estate, hedge funds, capital -risk and infrastructure.

This is a market that is expected to continue to grow in the years to come, and this is perhaps unsurprising given the distinct benefits of establishing a QIAIF in Ireland. These include:

  • Marketing in the EU. As Ireland is part of the European Union (EU), a QIAIF authorized under the AIFMD can use an EU marketing passport to market to professional investors within the bloc.

  • Choice of fund structures.The most common legal forms of a QIAIF 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 flexibility to choose the most appropriate structure.

  • Redomiciliation of funds. 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 to 10 weeks. The Central Bank of Ireland (CBI) provides a 24-hour approval timeframe once the proper documentation has been lodged.

  • Advantageous tax regime. QIAIFs are not subject to Irish tax on income or gains; distributions can be made to non-Irish shareholders without applying withholding tax; extensive VAT exemptions are available on services to a QIAIF (such as administration and filing fees); and QIAIFs can access Ireland’s network of double tax treaties with over
    70 countries.

How to set up an Irish QIAIF

The Irish Government and the CBI have worked hard to ensure that the funds regime in Ireland is as attractive as possible, whilst maintaining the highest standards. As such, they have streamlined the settlement process, which can be broken down into the following steps.

1. Choose the most suitable legal structure.

As indicated above, there are many available buildsall of which have specific requirements and offer distinct advantages, such as tax treatment, risk management and the ability to demonstrate substance.

The purpose and nature of the fund being created will generally determine the structure chosen and is an essential part of the creation process.

2. Select and appoint service providers.

QIAIFs tend to use a range of providers who offer a variety of services. In some cases, a business may provide multiple services. These will range from trustees and custodians to AIFMs, auditors and directors, and funds will need to ensure they use the right providers to ensure they are managed effectively.

Strict rules are in place regarding who can provide services to OFIs, and providers must be approved prior to fund approval. The Alternative Investment Fund Manager (AIFM), Administrators, Investment Manager/Advisor, Fund Administrator, Custodian and Auditor must all be pre-approved by the CBI. Similarly, the administrator and the depositary must be separate legal entities but may be part of the same economic group.

3. Obtain regulatory approval of the fund.

The CBI is responsible for the authorization and supervision of all undertakings for collective investment, including AIFs. The authorization process varies depending on the type of fund selected and the providers appointed as indicated above. Only when all of this is in place will the fund be approved.

4. Write the necessary documentation.

Unsurprisingly, all funds require many necessary documents to be completed. When a management company is appointed to a QIAIF, it is required to have a program of operations (POA) which sets out how it will carry out a number of management functions and details capital requirements and how these are controlled.

Similarly, several key documents must be drafted by legal counsel and filed with the CBI as part of the QIAIF approval process. These include constitutional documents (such as a memorandum of association where the QIAIF is established as an ICAV), a prospectus and agreements with the AIFM, the depositary and the administrator.

The Irish fund regime is not only built on the quality of its offering, but also on the fact that its regulations and standards set the bar high enough. That said, the regulator has simplified the establishment process so that investment managers can take care of attracting investment into 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 lifecycle of a fund for large institutional investors, international fund promoters and investment managers across all investment structures.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.