The Alternative Investment Fund Managers Directive (Directive 2011/61/EU) (AIFMD) brought with it significant changes for the regulation of the funds industry in Europe and here we take a look at events since implementation twelve months on from the close of the transitional period, focusing on the AIFMD regime in Ireland.
Ireland enacted legislation earlier this year which provides for a new type of corporate fund – the Irish Collective Asset-management Vehicle (ICAV). The ICAV is an innovative corporate structure specifically designed for use as an investment fund. It features a number of specific advantages when compared to previous corporate structures available for use as funds in Ireland, one of the primary jurisdictions for domiciling investment funds in Europe. This article outlines the salient features of the ICAV, highlights its differentiating characteristics and explores the instances where it is most likely to be of assistance to fund promoters in both the traditional and alternative spaces.
The hedge fund landscape changed dramatically in 2008 with assets under management in severe decline, the imposition of redemption gates, NAV suspensions and general restrictions on investor withdrawals being imposed on a scale that was previously unseen. As Lord Turner, Chairman of the UK Financial Services Regulatory Authority, noted, although specific national banking crises in the past have been more severe, none have had the global impact of the 2008 financial crisis.
One of the primary stated aims of the Alternative Investment Fund Managers Directive (AIFMD) was to increase investor protection. A key step in this regard was the imposition of a standard requirement that alternative investment funds managers (AIFMs) falling within the scope of the AIFMD and marketing their funds into Europe ensure each relevant alternative investment fund (AIF) which they manage appoints a third party depositary with respect to its underlying assets3.
The delegation model of fund management, whereby self-managed investment vehicles or their management companies appoint third party investment managers and advisers, has been a key basis upon which the success of the funds industry in Ireland has been built. There are currently in excess of 5,000 Irish domiciled funds and sub-funds, with assets in excess of 1 trillion euro, which have been established by over 400 fund promoters based in over 50 countries.
With the 22 June 2013 deadline for the implementation of the Alternative Investment Fund Managers Directive (Directive 2011/61/EC) (the Directive) fast approaching, fund managers based outside the EU need to consider how prepared they are for its introduction
Since December 2002, foreign institutional investors have been permitted to invest in China A Shares listed on the Shanghai Stock Exchange and the Shenzhen Stock Exchange through the Qualified Foreign Institutional Investor (QFII) programme. The QFII programme allows licensed foreign investors to invest in China A Shares in the local currency provided that certain minimum criteria are met. The return on the investment, including dividends and capital gains, can be legally exchanged into foreign currency and repatriated
Over the last 25 years, Ireland has earned a reputation as a leading domicile for internationally focused regulated investment funds. However in more recent years it has also grown to become the leading European jurisdiction for the establishment and servicing of alternative investment schemes and hedge funds in particular. Recent market statistics show that over 63% of European domiciled hedge funds currently use Irish legal structures while over 40% of global alternative investment funds (both Irish and non-Irish domiciled) are administered in Ireland.
The key role Ireland plays as an administration and servicing hub for funds domiciled in offshore jurisdictions continues to grow. The latest industry figures show that an incredible 43 per cent of global hedge fund assets are now administered in Ireland. This amounts to some €987 billion held in over 6,000 non-Irish funds which together represent almost 50% of the total assets under administration in Ireland.
The drift of funds from offshore jurisdictions to Ireland is continuing, with further asset managers announcing they are to take advantage of Ireland’s streamlined redomiciliation regime to move existing funds to Dublin.
A recent example was the Sarasin Guernsey fund range, which has been active in Guernsey for 20 years but recently announced that it is redomiciling to Ireland in order to enable the funds to be registered as UCITS.
Recent industry statistics show increased interest from alternative investment managers in basing their funds in onshore-regulated jurisdictions and as a result of this trend, Ireland recently overtook both Bermuda and the BVI as a domicile for hedge funds for the first time.
The European Parliament adopted the Alternative Investment Fund Managers Directive (the 'Directive') on 11 November 2010. The Directive contains new rules on the marketing of alternative investment funds in the EU by both European and non-European managers. This paper considers the impact of the provisions of the Directive, the opportunities afforded by this new European 'passport' for alternative funds and sets out the timeline for implementation of the new framework.
Ireland has made some important improvements to facilitate Islamic finance transactions in Ireland. Under the Finance Bill 2010, which applies from 1 January 2010, the Irish Ministry of Finance has introduced significant amendments to facilitate Islamic finance transactions in Ireland, especially the origination and issuance of sukuk.
Thanks to Ireland’s dedication to providing cost-effective, efficient and highly skilled fund administration, its global reputation as a leader in international investment management continues to expand. Clearly, recent events have required hedge funds to question existing business models and investors to increasingly seek greater transparency. This increased scrutiny has furthered Ireland’s strong industry position. With €1.4 trillion in total assets under administration, half of which is comprised of hedge fund administration, Ireland continues to demonstrate its strength and future potential.
Ireland has been an increasingly popular domicile for Japanese, Asian and other fund promoters for a number of years. Ireland, being an EU and OECD member country, has earned a reputation as a strong yet flexibly-regulated jurisdiction which meets the standards of selection of foreign investment funds securities under the relevant Japanese regulations (as well as being a recognised jurisdiction in Hong Kong and other countries).