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Updated AIFMD Q&A signals Ireland is ‘very much open for business’

The Central Bank of Ireland (CBI) has issued an updated Q&A document on the Alternative Investment Fund Managers Directive (AIFMD), with one of the new questions covering Qualifying Investor Alternative Investment Funds (QIAIFs) and non-discretionary investment advisors.

Claire Winrow, investment funds expert at Pinsent Masons, said the new question and response, together with guidance issued by the CBI in relation to share class features of closed-ended QIAIFs last year, “signals to investment managers that Ireland is very much open for business for funds pursuing typical closed-ended strategies.” 

The new question in the 41st edition of the AIFMD Q&A (41 page/ 685KB PDF) asks: “I am a QIAIF operating a private equity strategy or invested in physical assets which do not qualify as financial instruments. What are the Central Bank’s expectations in respect of an arrangement involving a non-discretionary investment advisor which provides services to the QIAIF?”

In its response, the CBI says that it may be appropriate to appoint an investment advisor on a non-discretionary basis, for example, in cases where geographical or asset type expertise is required. It added that, where QIAIFs are invested in physical assets which do not qualify as financial instruments, fees paid to non-discretionary investment advisors can appear disproportionately greater than those paid to other service providers since “services of this nature are not typically provided for in other investment strategies”.

The response also states that a QIAIF must disclose in its prospectus: how the fees of service providers are accrued and paid; the maximum fee payable in cases where fees are taken directly from the QIAIF’s assets; and where a single figure is disclosed covering all fees payable out of the assets of the QIAIF, whether a non-discretionary investment advisor will receive a fee greater than typically paid to non-discretionary investment advisors.

The CBI also noted that the QIAIF’s prospectus should detail the role of the AIFM with respect to its ongoing oversight and review of services provided by such non-discretionary investment advisors. 

It added that it intends to keep arrangements involving non-discretionary investment advisors under review and may conduct “additional supervisory initiatives with respect to QIAIFs”.

Gayle Bowen, investment funds expert at Pinsent Masons, said: “The recognition by the CBI that non-discretionary investment advisors advising on strategies such as private equity and real assets provide services not typically provided in other investment strategies and may therefore receive fees which appear disproportionately greater than those paid to other services providers to the QIAIF is particularly helpful for investment managers considering using the investment limited partnership structure in Ireland.”

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