Enhancements to the Irish regime governing the investment limited partnership (the "ILP") have led to increased interest in this structure as an option when considering the establishment of a new investment fund. The first part of our advisory series provides answers to the key questions on the features of the ILP. This part reviews the asset classes for which a partnership structure is typically considered and outlines details of the recent guidance issued by the Central Bank of Ireland that provides clarity in relation to the use of certain fund features that are typically available to closed-ended funds investing in these asset classes.
Typical Asset Classes
1. Private Equity
2. Private Debt
3. Real Estate
5. Other types of illiquid assets
Although the asset classes set out in the above table are those for which a partnership structure is typically used, the ILP is a flexible structure that can be utilised by asset managers seeking to establish both open-ended or closed-ended investment funds through a regulated partnership structure and accordingly may be used to invest in a broad range of asset classes including liquid assets. The ability to establish an ILP as an umbrella fund provides additional flexibility for managers that are considering setting up funds with differing investment strategies.
In February 2021, the Central Bank published guidance that applies to closed-ended qualifying investor alternative investment funds which typically invest in illiquid assets ("CE QIAIFs"). Essentially, this guidance provides for differentiated participation in CE QIAIFs to permit:
- the issuance of shares/units/interests at a price other than net asset value without prior approval of the Central Bank;
- the use of excuse and exclude provisions;
- stage investing; and
- management participation.
The guidance sets out general conditions that must be satisfied by funds seeking to provide for any or all of the above, such as the inclusion of language in a fund's constitutional document and disclosure in the fund's prospectus. In addition, the guidance details specific conditions that may also need to be considered.
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.