Once a decision has been made as to the appropriate legal structure, the next consideration is the type of regulatory authorisation required by the AIF.
The Central Bank of Ireland's (the "Central Bank") AIF regime imposes varying investment and borrowing restrictions depending on whether the AIF is available to retail investors (a "RIAIF") or qualifying investors (a "QIAIF"). A further category of AIF is the European Long-Term Investment Fund ("ELTIF"), which can be established within either a QIAIF or RIAIF umbrella structure.
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RIAIFs
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QIAIFs
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Eligible investors
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Retail investors.
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Investors who meet the qualifying investor criteria, namely: - a professional client within the meaning of Annex II of MiFID; or - an investor who receives an appraisal from an EU credit institution, a MiFID firm or a UCITS management company that the investor has the appropriate expertise, experience and knowledge to adequately understand the investment in the QIAIF; or an investor who self-certifies that it is an informed investor. |
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Minimum subscription
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None.
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€100,000 per investor.
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Requirement to have an AIFM
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Must appoint: - an Irish authorised AIFM; or - an EU authorised AIFM with a passport to conduct activities in Ireland. |
The AIFM may be: - an Irish authorised AIFM; - an EU authorised AIFM with a passport to conduct activities in Ireland; - a non-EU AIFM; - a registered or sub-threshold AIFM, which has assets under management below the de minimis thresholds prescribed in AIFMD; or the AIF itself, where the AIF opts to be internally-managed and not to designate an external AIFM. |
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Investment restrictions
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Diversification limits for a RIAIF are more generous than the limits that apply to UCITS. For example: - up to 20% of the net assets may be invested in unlisted securities (UCITS limit:10%); - up to 20% of the net assets may be invested in securities issued by the same issuer (UCITS limit: 10%); and - borrowings cannot exceed 25% of net assets (in contrast to a UCITS, borrowings can be effected for investment purposes). Unlike UCITS, RIAIFs may enter into physical short sales and may establish side pocket share classes for illiquid assets. |
A QIAIF is not subject to any borrowing or leverage limits set by the Central Bank. However, QIAIFs established as investment companies are subject to a statutory obligation to diversify risk. This obligation does not apply to other forms of QIAIFs such as unit trusts, CCFs, ILPs or ICAVs. |
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Ability to market
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Cannot avail of an EU passport to distribute their funds to retail investors in the EU. As a consequence, the marketing of a RIAIF in any EU country will depend on the fund offering rules in that country. |
A QIAIF with an EU authorised AIFM may be marketed on a passported basis across the EU to professional investors. A QIAIF with a non-EU AIFM may only be marketed according to the private placement rules applicable in individual EU jurisdictions and subject to the requirements of Article 42 of AIFMD. |
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Fund approval process
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The prospectus and constitutive document must be submitted to
the Central Bank for review. A RIAIF is typically approved by the
Central Bank within six to eight weeks from the date of submission
of the documents, depending on the complexity of the fund
structure.
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In contrast to RIAIFs, there is an accelerated authorisation
procedure for QIAIFs. The Central Bank will approve a fund within
24 hours of filing the fund documents with the Central Bank,
provided the legal advisers to the fund give certain confirmations
to the Central Bank regarding the structure of the fund and the
content of the fund documentation.
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This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.
