Non-UCITS Funds / AIFM
The Alternative Investment Fund Managers Directive (AIFMD) came into force in Ireland on 22 July 2013. AIFMD introduced a common regulatory regime for alternative investment funds (AIFs) (i.e. non-UCITS funds) within the European Economic Area (EEA). AIFMD was introduced as a response to the financial crisis in 2008 and was designed to increase investor protection and to enable European regulators obtain increased information in relation to AIFs being marketed into the EEA to assist their monitoring of systemic risk within the market.
Ireland is the largest hedge fund domicile in Europe with 2,342 funds with more than €499 billion in assets. Over 40% of global hedge funds are serviced in Ireland accounting for approximately €2 trillion in assets. As of August 2016, there were 2,342 Irish AIFs with assets in excess of €499 billion. This represents an increase of 230% since the first draft of AIFMD was published in 2009 reflecting the choice of Ireland as the default European jurisdiction for onshore regulated hedge funds.*
AIFs are not bound by an equivalent of UCITS harmonised investment restrictions, diversification or asset eligibility requirements and represent a more flexible option for managers. The investment restrictions are instead set according to the target investor type, with the certain restrictions applicable to funds targeting retail investors (i.e. RIAIFs) and are entirely disapplied for funds targeting professional and institutional investors (i.e. QIAIFs).
*Source: Irish Funds (IF) and Central Bank of Ireland, August 2016
Maples' AIFMD Expertise
Maples have been instrumental in the industry engagement in Ireland on AIFMD. Our partners occupy senior roles in the most important committees of Irish Funds and other industry bodies. This has placed us at the core of the AIFMD debate in Ireland, exposing us to the latest regulatory developments and issues and giving us integral involvement in industry responses. We advised the first Irish AIFM to manage AIFs cross-border in the EEA and the first QIAIF to originate loans.
At an industry level we were chosen by the Alternative Investment Management Association (AIMA) to make submissions on its behalf with respect to the AIFMD remuneration and transitional provisions, and to author the Ireland chapter of its AIFMD handbook. Separately, we were instructed by the Association for Financial Markets in Europe (AFME), on behalf of the entire London prime brokerage community, to run their submissions to the Irish Central Bank regarding the discharge of depositary liability.
Qualifying Investor AIFs
The QIAIF is Ireland's flagship AIF. It is a well-established, regulated investment fund vehicle that addresses the flexibility and speed to market requirements of sophisticated investors.
The QIAIF is the most adaptable category of Irish regulated fund. As the QIAIF provides a high level of structuring flexibility, as well as a fast-track authorisation process, it is the structure used most frequently for hedge funds, fund of hedge funds, private equity funds, real estate funds and master feeder structures. One trade-off of this flexibility is that the Central Bank restricts its availability to only sophisticated/professional investors by applying minimum subscription and investor eligibility requirements.
Key Features of a QIAIF:
- QIAIFs may be established as an Irish collective asset-management vehicle (ICAV), an investment company with variable capital, a unit trust, a common contractual fund or an investment limited partnership;
- 24-hour Central Bank approval process, which facilitates speed to market;
- Removal of the Central Bank's general conditions relating to investment policies, borrowing and leverage applicable to UCITS;
- The AIFMD marketing passport - This distribution facility enables EEA AIFMs to create a single EEA product rather than having to establish the same product on a jurisdiction by jurisdiction basis; and
- No issuer limits or diversification requirements (although there is a requirement for QIAIF investment companies to spread investment risk).
Retail Investor AIFs (RIAIF)
RIAIFs may be marketed to retail investors and are not subject to any minimum subscription requirements. The RIAIF is designed to be a balance between the UCITS and QIAIF regimes, for products intended for retail investors but which cannot fully meet the onerous investment restrictions and diversification requirements of the UCITS framework. The RIAIF provides an attractive alternative for managers who need to set up a more highly regulated fund but whose investment strategies do not easily fit within the UCITS space.
Distribution of AIFs
AIFMD permits authorised EEA AIFMs to market their EEA AIFs to professional investors via the AIFMD marketing passport. While the AIFMD contemplates extending these rights to non-EEA AIFMs subject to ESMA analysis and approval, as at December 2016 this has not yet occurred and is currently under consideration. Until such time as a decision is made, these managers will have to rely on private placement regimes in compliance with local implementing the provisions of AIFMD.
Further details on our services supporting the global distribution of AIFs by way of passport or private placement are available in the Global Registration Services section of the website.
For more information about AIFs, contact our Dublin office on +353 1 619 2000.
Combining our partners' expertise with the firm's core values ensures that our advice is commercially focused and solutions driven.