Ireland ILP IN FOCUS 2021 - Matheson
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Ireland ILP
IN FOCUS 2021
COST EFFICIENCY & SPEED FLEXIBILITY INDUSTRY GROWTH
ILP brings swift and cost- New structure accommodates Private funds pegged for
efficient launch of sub-funds broad range of asset classes expansion in Ireland
Featuring Alter Domus | CSC | DMS Governance | Maples Group | Matheson
M AT H E S O N
The appeal of a regulated
partnership
Interview with Barry O’Connor
R
egulation has been at the forefront of investors’ are key to investors. Until now, the material gap in the
minds ever since the global financial crisis in 2008. QIAIF regime has been the lack of a suitable partnership
In the current environment, the need for oversight vehicle and the enhanced ILP addresses that.”
and monitoring is even more necessary as the industry Under the QIAIF regime, the Central Bank of Ireland
navigates uncharted waters. However, this requirement doesn’t review the documentation in the vast majority of
for more robust supervision needs to be tempered with cases. Rather, it relies on confirmations from the lawyers.
flexibility. This means that, if all the documents and service providers
Ireland’s amended Investment Limited Partnership (ILP) are in order, a manager can make a filing with the Central
Act, which came into effect on 1 February, strikes a bal- Bank by 5pm one day, and have their fund approved the
ance between regulation and broad investment capabilities. day after.
Barry O’Connor, partner in the Asset Management and “Having a regulated fund in this space come to market
Investment Funds Group at Matheson, explains: “Within in this kind of timeframe is very attractive to managers. The
the ILP and in contrast to similar vehicles in other jurisdic- QIAIF regime also doesn’t impose many limits on what the
tions the fund itself is regulated, which makes a significant fund can invest in or the amount of leverage which can
difference to investors. This vehicle will sit within Ireland’s be applied. This is something which fund managers and
existing Qualifying Investor Alternative Investment Fund investors are keen on. Therefore, this results in a vehicle
(QIAIF) regulatory regime, which has been around since the which can invest in a broad range of asset classes and
1990s and which has been incredibly successful. The QIAIF which can be brought to market quickly,” O’Connor notes.
regime offers features that managers appreciate – like the What the QIAIF regime does regulate are issues like
speed to market – but it also has controls over governance monitoring and independent oversight, conflicts of interest,
aspects that are absent in unregulated vehicles and which conduct, reporting, fitness and probity of directors etc. “The
16 IRELAND ILP IN FOCUS | Mar 2021
M AT H E S O N
regulatory regime provides several protections didn’t have the structure available. Now this
for investors without any of the elements has changed and we’re on a level playing
which could cause a drag on the fund or stop field with other jurisdictions like Luxembourg,”
the managers from doing what they want to O’Connor comments.
do,” O’Connor adds. He believes the initial appetite for the
structure will be from managers who don’t
Greater on-shoring already have a European footprint: “There is
Traditionally, investors largely got exposure to a lot more interest coming from managers
these alternative asset classes through unreg- who are coming to Europe for the first time
ulated funds. However, as more investors have and therefore with a completely clean slate–
been on-shoring their investments, motivated primarily from the US. This is because those
by tax implications and other factors, having a who already have Luxembourg partnerships
regulated alternative is particularly attractive. will be less likely to move existing funds or to
“The appetite for more regulation has use the ILP for the next vintage of an existing
become a long-running theme in the indus- fund. However, those managers will consider
try. In addition to the current pandemic, the the ILP as an option when looking to set up a
2008 financial crisis and scandals like the completely new fund.”
Bernie Madoff fraud case caused investors In O’Connor’s view, the growth of the
to feel a bit lost. The investor sentiment was ILP will start off as a trickle which may then
then complemented by the introduction of become a deluge: “I think it will be a slow
the Alternative Investment Fund Managers burner initially but once it gets going, it could
Directive, which drove managers and their cli- be very successful. For years, managers have
ents towards regulated products. Further, for been saying to us that “if only” Ireland had
some investors, especially in the institutional a suitable partnership, they would have set
and pension space, the need for regulated their fund up here.” He says Matheson gave
funds was then built into their mandates.” 52 presentations to clients and prospective
“This direction of travel towards regu- clients between the middle of January and
lated funds has been sustained but it’s now the end of February, which is indicative of the
being pushed along by tax issues as well. appetite for this structure.
Having the Cayman Islands going on and off Now that Ireland is on a level playing field
the European Union blacklist has left some in terms of the structures it offers, the juris-
investors wary of investing in Cayman funds diction can focus on its differentiating factors.
because of the worry that the jurisdiction will O’Connor says: “Now that we’re at the table
be blacklisted again,” O’Connor outlines. and can have these conversations, we can
Ireland has a strong track record in pro- highlight things that managers have said
viding regulated alternative funds. O’Connor (all else being equal) attract them to Ireland,
details: “Back when the focus on regulation including that English is our first language and
began to ramp up, Ireland had a fantastic head Ireland is a common law jurisdiction, which is
start. We were one of the few, if not the only, familiar to managers outside of Europe. Also,
jurisdictions in the world that offered hedge other cultural factors come into play, such as
funds that were regulated.” service standards. We bring a solutions-driven
mind-set rather than a more administrative
Final piece of the puzzle approach which people might perceive is
The ILP has completed Ireland’s offer as a offered elsewhere.” n
financial jurisdiction. The amended legislation
provides the last piece of the puzzle, allowing
Ireland to offer a suitable vehicle for all strate-
Barry O’Connor
gies and investor types. Partner, Matheson
“The main benefit of this law is not any indi-
vidual feature of the structure itself, but rather Barry O’Connor is a partner in the Asset Management and Investment Funds
Group at Matheson. He practices financial services law and advises many of
the fact that Ireland now has a partnership that
the world’s leading financial institutions, investment banks, asset management
works. Before this law was enacted, manag- companies, broker-dealers and corporations carrying on business through Irish
ers had a hard reason not to come to Ireland domiciled investment funds (ICAVs, investment companies, unit trusts, CCFs and
ILPs) and Irish domiciled management companies (UCITS and AIFMs).
when setting up partnerships – we simply
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