Ireland: The ICAV – Maples And Calder Checks The Box

16 March 2016 marks the first anniversary of the registration of the first Irish Collective Asset-management Vehicle ("ICAV") with the Central Bank of Ireland (the "Central Bank"). In the ensuing 12 months, 146 ICAVs, comprising 265 sub-funds, have been authorised by the Central Bank, establishing the ICAV as the most popular vehicle for global institutions and private fund managers forming Irish funds as either UCITS or AIFs over this period.

As noted in previous client updates, Maples and Calder advised on the very first ICAV registered and authorised by the Central Bank and also worked on a number of other innovative ICAV launches (including the first UCITS ICAV and first private client ICAV structure). Since then we have retained our position as the leading Irish counsel on ICAVs and to date have advised on 30% of all ICAV sub-funds authorised by the Central Bank, which is nearly twice as many as our nearest rival. 

This role provides us with an unparralelled overview of the Irish market and enables us to track all relevant information and statistics on the ICAV. In this client upate we look at some of the significant factors which have contributed to the success of the ICAV, the key trends and our structuring experiences with the ICAV.

WHAT IS AN ICAV?
The ICAV is a corporate vehicle. It is similar to existing Irish investment companies established as PLCs but with the significant advantage that the ICAV was specifically created for the Irish funds industry, enabling it to be more flexible than the investment company.

ICAV SUCCESS - THE KEY FACTORS
Key factors to the success of the ICAV include:

Flexibility - The ICAV can accommodate a full suite of liquidity options as well as traditional and alternative investment strategies making it suitable for mutual funds, liquid alternatives, hedge, real estate, infrastructure, lending vehicles, private equity, managed accounts, funds of funds and hybrid funds.

EU Passport - The ICAV can be established as either a UCITS or an alternative investment fund ("AIF") structure. As such the ICAV can avail of the pan-European UCITS and/or AIFMD marketing passports respectively.

No Risk Spreading Rules - ICAVs are not subject to risk spreading obligations, making them extremely useful for single asset funds and funds with very concentrated positions. This has been particularly appealing to managers establishing real estate ICAVs.

Check the Box - the ICAV may elect to "check-the-box" to be treated as a tax transparent partnership or a "disregarded entity" (rather than an opaque "per se corporation") for US federal tax purposes. In addition while the ICAV may make this US check-the-box election, it will still generally be treated as a corporate vehicle in most other jurisdictions. This may allow the ICAV avail of double tax treaties that Ireland has entered into, subject to the provisions of each treaty and the rules in the relevant treaty partner country in each case. 

Tax Efficiencies - The ICAV, like the investment company, is an investment undertaking for Irish tax purposes and will be subject to the same gross roll-up regime, i.e. typically any profits and gains of the ICAV are exempt from tax in Ireland and profits may be distributed to non-resident investors without a charge to Irish tax, subject in both cases to certain conditions. 

Separate Sub-Fund Accounts - An umbrella ICAV can produce separate financial reports and accounts for sub-funds with differing year end dates (as opposed to one consolidated set of accounts for the entire umbrella). This has proven attractive for promoters of multi-manager or hosted platforms concerned by sensitivities in disclosing differing fee arrangements or portfolio compositions of individual managers within the same platform.

Dedicated Legislation - The ICAV legislation essentially drew upon the best and most successful aspects of Irish company law, improving it in several material respects. The advantage of this is that with its own specific legislative code, the ICAV will not be impacted by amendments to European/Irish company law (which are targeted at ordinary companies and not funds), which will protect the ICAV from any unintended consequences of such legislative changes.

ICAV – THE KEY TRENDS

To date some of the largest investment banks, traditional asset managers, hedge funds and private equity clients have established ICAVs.

The ICAV has gained significant traction with fund platform and/or managed account promoters. Approximately 63% of all authorised ICAV sub-funds have been established within umbrella platforms, taking advantage of the statutory segregated liability protections in the ICAV Act. Whilst this is a high percentage, it is not a surprising statistic. We have seen a noticeable trend towards consolidation in the alternative space since the implementation of the Alternative Investment Fund Managers Directive ("AIFMD") and the emergence of the " hosted AIFM" model. Small to mid-size managers without the scale to absorb the costs of complying with AIFMD are attracted by the "plug and play" solution offered by the hosted AIFM and hosted platforms. The manager's sub-fund, which is its own segregated cell within the umbrella, simply slots into the existing corporate architecture of the platform. The hosted AIFM model removes much of the regulatory burden from these managers, enabling them to focus solely on the management of the assets.

Whilst this trend is not as pronounced in UCITS, given the imminent implementation of the UCITS V Directive (which is largely an alignment with the requirements of AIFMD) and the greater focus on maintaining corporate substance in Ireland, we anticipate that this "flight to platform" will similarly increase in the UCITS space.

Another trend which is clearly evident from our ICAV statistics and experience is the prevalence of real estate ICAVs. Approximately 32% of the alternative ICAV sub-funds established to date are real estate focused. In our view this is largely due to the structuring flexibility and tax efficiencies of the ICAV (as outlined above) and also to the current attractiveness of Irish real estate to large institutional property investors.

ICAV – WHAT WE ARE SEEING

Maples and Calder, representing just under one third of the entire ICAV market and having formed nearly twice as many ICAV sub-funds than any other legal firm in Ireland, has gained valuable insights into how managers are utilising the ICAV structure.

The number one use of ICAV appears to be as the regulated EU fund structure of choice and it commonly emerges as the preferred structure when compared to alternatives both in Ireland or other EU jurisdictions (e.g. it has many advantages over Luxembourg's SICAV).

Across our global funds practice, we see many ICAVs being set up as parallel funds to Cayman Islands structures for managers looking to offer leading offshore and onshore fund solutions to their investors. We have advised on some pairing of onshore and offshore vehicles in combined structures.

ICAV – WHAT NEXT?

As is clear from the year one statistics, the ICAV has become the Irish fund vehicle of choice in both the retail and professional investor space. We see this trend continuing as the number of global investors, fund financing counterparties, investment managers and fund service providers get increasingly comfortable with the structuring, establishment, management and distribution of ICAVs.

While detailed legal, regulatory and tax advice is a prerequisite for the establishment of any successful investment fund, increasing market acceptance of the ICAV as the number one regulated EU fund structure and the enhanced authorisation timeframes provided by the Central Bank (in comparison to other EU competent authorities), should see number of ICAVs significantly grow in 2016 and beyond.

In additon to new fund set-ups we also anticipate that a number of existing Irish investment companies will avail of the relatively straightforward mechanism to convert into an ICAV. To date there have only been a small number of conversions (14%), however we see this increasing as a large number of UCITS managers are in the process of converting their investment companies into an ICAV as part of the overall UCITS V implementation this month.

For further information on the ICAV and its impact for Ireland and/or hosted AIFM solutions, please contact your usual Maples and Calder contact. 

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Ian Conlon
Peter Stapleton
Stephen Carty
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.