Ireland’s regulatory framework, tax efficiency, global distribution capabilities, and sophisticated service ecosystem make it a leading domicile for alternative funds.
Ireland continues to be one of the top domiciles for private capital and hedge funds, with 17 of the top 20 global asset managers overseeing Irish domiciled funds[1]. Ireland is second only to Luxembourg as a European domicile and accounts for 20% of European fund assets[2].
Ireland’s tax advantages, strong track record, and robust infrastructure draw investors internationally. General partners (GPs) can choose from a range of products and fund structures that are easily accessible to their limited partners (LPs), and the country has a reputation for product and market innovation as well as strong investor protections.
Top 5 most used fund structures for investors in Ireland
Ireland’s improved Investment Limited Partnership (ILP) structure and central bank-approved depositary licensing scheme have further established the country as a choice destination for private funds. The benefits of the ILP Act and the recent updates to the AIF Rulebook include greater flexibility and cost-efficiencies, facilitating improved operations for managers and investors. This encompasses provisions for excusing and excluding provisions, stage investing, and a more straightforward process for capital withdrawals and distributions. Other commonly used fund structures in Ireland include Irish Collective Asset-Management Vehicle (ICAV), 1907 Act Limited Partnership (1907 LP), Common Contractual Fund (CCF), and Unit Trust.
1. Investment Limited Partnership (ILP)
The ILP is a partnership structure governed by common law and regulated under AIFMD. It’s most suitable for sophisticated investors looking to use it as a private investment fund.
2. Irish Collective Asset-Management Vehicle (ICAV)
The ICAV is Ireland’s mainstream fund vehicle and can be used for both traditional and alternative investment funds. As a corporate entity, it’s owned by shareholders and governed by a board of directors. This has been the structure of choice for many managers since its arrival in 2015.
3. 1907 Act Limited Partnership (1907 LP)
The 1907 LP is a simpler and lower cost partnership structure that sits outside of EU regulation, and tends to appeal to sophisticated investors that would like a European investment vehicle, but don’t require the protections or benefits afforded by European regulation.
4. Common Contractual Fund (CCF)
A CCF is a tax transparent investment vehicle primarily designed for tax-exempt institutional investors, such as pension funds. The main benefit of a CCF is that, where the prerequisite tax treaties are in place, investments held by the fund are treated for tax purposes as if they were held in the name of the end investor.
5. Unit Trust
A unit trust is a contractual structure governed by a trust deed between the trustee and a management company. The trust deed serves as the primary legal document that sets out the rights and obligations of the trustee, management company, and unit holders.
Establishing a fund in Ireland: key considerations
Despite the country’s open economy and business-friendly climate, newcomers may find Ireland’s tax and legal systems difficult to navigate. Before entering the Irish market, foreign GPs should seek professional advice to understand these complex matters. Working with a trusted local partner can lessen the regulatory and tax burdens, enabling fund managers to focus on investment strategies.
Navigating increasing regulatory requirements is a hurdle for investment managers wanting to set up a fund in Ireland. As the European financial system continues to grow in scale and complexity, regulatory frameworks in turn are keeping pace. While these measures protect investors and consumers, they add an extra layer of complexity for general partners and other fund managers, such as reduced flexibility when managing the fund’s assets due to imposing regulatory restrictions.
Along with this complexity comes added expense. Foreign investors setting up a fund in Ireland must comply with Alternative Investment Fund Manager Directive (AIFMD) regulations and setting up an AIFM is costly and resource intensive. Especially when managing international investors who may require or expect differing levels of transparency, governance, and reporting. Without local knowledge, overseas firms are at a disadvantage. That’s why many appoint a third-party AIFM via a trusted partner such as CSC that can assist with the required risk and regulatory requirements. Looking to set up a fund in Ireland? Download Ireland: Your Guide to Fund Structures.
