1. AIFMD Developments

1.1 Agreement on final political text of AIFMD II (This is a further update to section 1.1 of the quarterly report covering the third quarter of 2023)

On 10 November, the Council of the EU published the final compromise text of the political agreement on a proposed directive amending the Alternative Investment Fund Managers Directive (2011/61/EU) ("AIFMD") and the UCITS Directive (2009/65/EC) relating to delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services, and loan origination by alternative investment funds (referred to as "AIFMD II") and the accompanying note with a view to formal adoption of the text of the legislative proposal by the Council and Parliament.

Walkers' asset management and investment funds team have published an advisory entitled 'AIFMD II - A Closer Look' which assesses the key changes which will impact full-scope EU alternative investment fund managers ("AIFMs") and the next steps in the implementation of AIFMD II.

1.2 AIFMD Q&A updated (48th edition)

On 1 November 2023, the Central Bank published the 48th Edition of its AIFMD Q&A.

This new edition features the publication of:

  • A new Q&A (ID 1156) which sets out the circumstances in which the Central Bank may permit an ILP whose sole business is the investment of its funds in property with the aim of spreading investment risk and giving its partners the benefit of the management of its assets, to avail of an exemption, pursuant to section 15(1) of the Investment Limited Partnerships Act 1994, from the provisions of European Union (Qualifying Partnerships: Accounting and Auditing) Regulations 2019 (S.I. 597 of 2019). The Q&A notes that the general partner of an existing ILP may apply to the Central Bank to avail of the exemption.
  • A revised Q&A (ID 1084) which extends the exemption from the L-QIAIF regime (which is currently available to QIAIFs who grant loans to wholly-owned subsidiaries) to include QIAIFs who grant loans to co-investment vehicles in which the QIAIF has a majority interest and provided such lending is ancillary to the QIAIF's predominant investment strategy.

Our asset management and investment funds team have published an advisory on the significant updates to the AIFMD Q&A and on the consultation on the implementation of the Irish ELTIF offering (as outlined in section 3.1 of this report).

1.3 AIFMD Q&A updated (49th edition)

On 27 November 2023, the Central Bank published the 49th Edition of its AIFMD Q&A which contains updates related to the PRIIPs key information document ("KID") and the publication of three new Q&As which consider what is permissible when a RIAIF or QIAIF invests through a subsidiary.

The revisions to existing Q&A ID 1126 clarify that where an AIF is required to produce a PRIIPs KID, this should be filed through the Central Bank's Portal in accordance with the Central Bank's guidance on the filing of a PRIIPs KID. The Central Bank's guidance has been updated to specify that authorised AIFs that are required to produce a PRIIPs KID can submit their KID through the Portal under the section "Investment Funds- Ad Hoc returns" from 1 January 2024.

The AIFMD Q&A also features the publication of three new Q&As (IDs 1157, 1158 and 1159) which consider what is permissible when a RIAIF/QIAIF invests through a subsidiary.

Q&A 1157 concerns the 'establishment test' and states that, where a QIAIF/RIAIF intends to invest through a wholly owned company or a subsidiary and the wholly owned company or subsidiary was established, with the intention of the QIAIF/RIAIF using it for investment purposes, prior to the establishment of the QIAIF/RIAIF, the Central Bank considers the wholly owned company or subsidiary as being established by the QIAIF/RIAIF, including in circumstances where the wholly owned company or subsidiary existed prior to the establishment of the QIAIF/ RIAIF.

Q&A 1158 states that, where a QIAIF/RIAIF intends to invest through a wholly owned company or subsidiary and the wholly owned company or subsidiary has been established with the intention of the QIAIF/RIAIF using it for investment purposes, the wholly owned company or subsidiary can establish or participate in the establishment of a further vehicle that is also used for investment purposes. This is permitted subject to compliance with the Central Bank's requirements in relation to subsidiaries (as set out in the AIF Rulebook) and the requirements of the Q&As on subsidiaries.

Q&A 1159 states that where a QIAIF/RIAIF intends to invest through a co-investment vehicle that includes other third party investors and is not a wholly owned subsidiary of the QIAIF/RIAIF, the Central Bank requires that the ownership/control of the co-investment vehicle must reflect the actual economic interest that the QIAIF/RIAIF has in that vehicle and the QIAIF/RIAIF must demonstrate that such arrangements reflect the true economic interests of the parties holding shares in that vehicle. The reasons for use of a co-investment vehicle, rather than a wholly owned subsidiary, must be documented by the board of the AIFM and approved by the depositary in writing and be available to the Central Bank on request. The arrangement should not be structured in such a way as to circumvent the policy objectives of the Q&A.

1.4 European Union (Alternative Investment Fund Managers) (Amendment) Regulations (S.I. No. 2023/629)

On 15 December 2023, the European Union (Alternative Investment Fund Managers) (Amendment) Regulations 2023 (S.I. No. 630/2023) was published in Iris Oifiguil with the purpose of ensuring alignment with EU requirements.

This S.I. revokes paragraph (7A) of Regulation 22 of the AIFM Regulations 2013 (concerning the effect of an event of insolvency on assets held in custody by depositaries and third parties).

1.5 AIF Rulebook (updated November 2023) (This is a further update to section 3.1 of the quarterly report covering the fourth quarter of 2022)

On 27 November 2023, the Central Bank issued its revised AIF Rulebook setting out in Part B of Chapter 3, (AIFM Requirements), rules on the additional capital requirements for AIFMs authorised to provide individual portfolio management services.

The Central Bank also updated its Minimum Capital Requirements ("MCR") Reporting Template for AIFMs. The updated MCR template reflects the amendment pursuant to Regulation 10(5) of the European Union (Alternative Investment Fund Managers) Regulations 2013 (the "Irish AIFM Regulations"), such that the own funds of an AIFM can never be less than the amount prescribed in Article 11 of Regulation (EU) No. 2019/2033 on the prudential requirements of investment firms (the "IFR"), the fixed overhead requirement.

The Central Bank has also updated its table summarising the reporting requirements for AIFMs. Please note that reporting obligations may vary on a firm-by-firm basis.

The new requirements will not apply to AIFMs authorised to provide individual portfolio management services on or before 27 November 2023 until 27 May 2024. For the avoidance of doubt, the current condition of authorisation continues to apply to all AIFMs authorised to provide individual portfolio management services authorised on or before 27 November 2023 pending the application of the new own funds requirements. AIFMs which obtain authorisation to provide individual portfolio management services after 27 November 2023 will be subject to these new requirements upon authorisation.

To view the full article click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.