Retail funds

Available vehicles

What are the main legal vehicles used to set up a retail fund? How are they formed?

There are several different legal vehicles that can be used to set up retail funds (ie, UCITS and RIAIFs). QIAIFs (which are dealt with separately in question 27) can also be formed using these legal vehicles.

The principal legal structures of UCITS, RIAIFs and QIAIFs are as follows.

Irish collective asset-management vehicles (ICAVs)

ICAVs (formed) under the Irish Collective Asset-management Vehicles Act 2015, as amended, are corporate bodies with limited liability where the actual value of the paid-up share capital is at all times equal to the NAV of the ICAV and the share capital is divided into a specified number of shares without assigning any nominal value to them. The assets of the ICAV belong exclusively to the ICAV and no shareholder has any interest in these assets.

Unit trusts

Unit trusts (formed under the UCITS Regulations or under the Unit Trusts Act 1990, or both) are contractual arrangements created under a trust deed made between a management company and a depositary. Unit trusts do not have their own legal personality and contracts are entered into by the management company and, in certain cases, by the trustee. A unit represents an undivided beneficial interest in the assets of the unit trust.

Investment companies

Investment companies (formed under Part 24 of the Companies Act 2014) as amended are public limited liability companies incorporated with variable capital (ie, the actual value of the paid-up share capital is equal at all times to the value of the NAV of the company). Shares issued do not represent a legal or beneficial interest in the company’s assets.

Investment limited partnerships (ILPs)

ILPs (formed under the Investment Limited Partnerships Act 1994) are partnerships between one or more general partners and one or more limited partners, constituted by written agreements between the parties known as partnership agreements. A general partner is personally liable for the debts and obligations of the partnership and a limited partner contributes or undertakes to contribute a stated amount to the capital of the partnership.

Common contractual funds (CCFs)

CCFs (formed under the UCITS Regulations or the Investment Funds, Companies and Miscellaneous Provisions Act 2005) are funds constituted under contract law by means of a deed of constitution executed under seal by a management company. The CCF is an unincorporated body and does not have a legal personality, and therefore may act only through the management company. Participants in the CCF hold their participation as co-owners and each participant holds an undivided co-ownership interest as a ‘tenant in common’ with other participants.

Each of these fund vehicles (with the exception of ILPs) may be established as either standalone entities or as an umbrella fund with separate sub-funds. ILPs are not currently capable of being established as umbrella funds.

It is also possible to have unauthorised AIFs (ie, AIFs that are not authorised by the Central Bank under Irish funds legislation), the principal legal structures of which include real estate investment trusts, exempt unit trusts and limited partnerships established under the Limited Partnerships Act 1907.

Laws and regulations

What are the key laws and other sets of rules that govern retail funds?

In addition to the legislation outlined in question 12, there is a significant amount of legislation at both European and domestic level applicable to retail funds that will vary depending on the fund structure and status. ESMA and the Central Bank have also issued guidance applicable to retail funds.

In summary, for UCITS, the key laws and regulations include the following:

  • the UCITS Directive;
  • the UCITS Regulations; and
  • the Central Bank (Supervision and Enforcement) Act 2013 (section 48(1)) (Undertakings for Collective Investment in Transferable Securities) Regulations 2015, SI No. 420/2015 as amended (the Central Bank UCITS Regulations).

For RIAIFs, the key laws and regulations include the following:

  • the AIFMD;
  • the Irish AIFMD Regulations;
  • Commission Delegated Regulation (EU) No. 231/2013 supplementing the AIFMD with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision;
  • the Prospectus (Directive 2003/71/EC) Regulations 2005 (for certain categories of closed-ended funds) (the Prospectus Directive), as amended;
  • the Central Bank AIF Rulebook; and
  • the European Union (Key Information Document for Packaged Retail and Insurance-Based Investment Products) Regulations 2017 (Regulation (EU) No. 1286/2014).

In addition, Commission-delegated and implementing regulations have been adopted by the European Commission in specific areas in order to ensure that the UCITS Directive and the AIFMD are implemented consistently across the EU.


Must retail funds be authorised or licensed to be established or marketed in your jurisdiction?

Yes, retail funds domiciled in Ireland must be authorised by the Central Bank. Once authorised, these retail funds may market to Irish investors by virtue of their authorisation.


Who can market retail funds? To whom can they be marketed?

The marketing and distribution of retail funds can be carried out by the fund or the management company (UCITS or AIFM) or delegated to the investment manager, distributor or any other entity authorised to carry out such function, such as regulated intermediaries. There are no minimum subscription or investor qualification requirements, imposed by regulations, for retail funds and they may be marketed to any investors who fulfil the criteria set out in the offering document.

Managers and operators

Are there any special requirements that apply to managers or operators of retail funds?

Managers of retail funds are subject to the regulatory requirements that derive from European legislation as transposed in Ireland (the UCITS Directive and the AIFMD). In addition, managers are subject to the applicable Central Bank rules and regulations. See question 3.

Investment and borrowing restrictions

What are the investment and borrowing restrictions on retail funds?


In order to seek to ensure investor protection, UCITS are subject to specific investment restrictions, relating both to the type of investment that may be made and the extent of such investment.

Permitted asset classes

In summary, UCITS are permitted to invest in the following:

  • transferable securities and money market instruments that are either admitted to official listing on a stock exchange in an EU member state or non-EU member state or that are dealt on a market that is regulated, operating regularly, recognised and open to the public;
  • recently issued transferable securities that will be admitted to official listing on a stock exchange or other market (as described above) within a year;
  • money market instruments, other than those dealt in on a regulated market, provided that the issue or the issuer is itself regulated for the purpose of protecting investors and savings;
  • units of UCITS;
  • units of non-UCITS CIS (in certain cases);
  • deposits with credit institutions;
  • financial derivative instruments that meet certain criteria; and
  • transferable securities and money market instruments other than those referred to above (subject to a maximum aggregate limit of the NAV).

Investment and borrowing restrictions

The UCITS investment and borrowing restrictions are set out in the UCITS Directive, UCITS Regulations and Central Bank UCITS Regulations. However, in summary, the following should be noted:

  • UCITS are required to provide high levels of portfolio diversification and liquidity;
  • no more than 10 per cent of UCITS’ net assets may be invested in transferable securities or money market instruments issued by the same body, with a further aggregate limitation of 40 per cent of net assets on exposures of greater than 5 per cent to single issuers (otherwise known as the ‘5/10/40’ rule);
  • there are exceptions to the above for investments issued or guaranteed by governments, local authorities or certain public international or supranational bodies;
  • certain index replicators can take exposures of up to 20 per cent of net assets to single issuers, with up to 35 per cent to a single issuer in exceptional market conditions;
  • up to 100 per cent of net assets can be invested in other CIS, provided no more than 20 per cent is invested in any one CIS, with an aggregate restriction of 30 per cent of net assets applying to investment in non-UCITS CIS as well as strict rules applying to the nature of the CIS in which a UCITS can invest, as well as limiting investment to a maximum of 25 per cent of the units of the underlying CIS;
  • master-feeder structures are permitted under which a UCITS may invest, by way of derogation from the above limits, at least 85 per cent of its assets in the units of another UCITS;
  • no more than 20 per cent of net assets can be invested in cash deposits with any one credit institution as permitted by the Central Bank and up to 10 per cent of net assets may be held for ancillary liquidity purposes with other credit institutions (which 10 per cent limit is raised to 20 per cent in the case of deposits made with the custodian or trustee);
  • investments in or through derivatives may be made or taken to assets into which a UCITS can invest directly including financial instruments having one or several characteristics of those assets, and to financial indices, interest rates, foreign exchange rates and currencies (the maximum exposure to a single over-the-counter derivative counterparty is 5 per cent, increasing to 10 per cent for certain credit institutions) - various aggregations of the above restrictions apply;
  • the maximum aggregate exposure to securities and instruments (other than CIS, derivatives and cash) not listed or traded on a recognised market is 10 per cent of net assets;
  • additional general provisions apply, including concentration limits, prohibitions on taking legal or management control of issuers or prohibitions on uncovered sales; and
  • borrowings are limited to 10 per cent of net assets and can only be used for temporary purposes (for liquidity).

Efficient portfolio management (EPM) techniques and instruments

UCITS are also permitted to use techniques and instruments relating to transferable securities and money market instruments for EPM purposes, which is taken to mean that they are economically appropriate and are entered into with the aim of reducing risk, reducing cost or generating additional capital or income (with a level of risk consistent with the UCITS risk profile).

Derivatives used for EPM purposes must comply with normal rules for investment in financial derivative instruments.

Repos or reverse repos and stock lending are expressly permitted with strict rules regarding collateral including acceptable forms of collateral, levels provided, diversification of collateral, valuation of collateral and how and where it is held and maintained.


RIAIFs are subject to investment and eligible asset restrictions that are less restrictive than for UCITS funds but are far more restrictive than under the QIAIF regulatory regime. In particular, RIAIFs are subject to the following key investment and borrowing restrictions:

  • investment in unlisted securities may be up to 20 per cent of the NAV of the RIAIF;
  • investment in securities issued by the same institution may be up to 20 per cent of the NAV;
  • index-tracking RIAIFs are subject to a limit of 35 per cent of the NAV of investments in securities by the same institution;
  • no more than 20 per cent of the NAV may be invested in any class of security issued by a single issuer (does not apply to investment in other open-ended funds);
  • investment of more than 20 per cent and up to 100 per cent of the NAV of the relevant RIAIF in government-backed securities requires the prior approval of the Central Bank;
  • no more than 10 per cent of the NAV may be held in deposits with any one institution (this limit may be raised to 30 per cent for European Economic Area institutions or certain other credit institutions or the depositary of the RIAIF);
  • up to 30 per cent of the NAV may be invested in any one open-ended regulated fund (this rule may be disapplied for certain categories of regulated funds under the AIF Rulebook);
  • RIAIFs investing over 30 per cent of their NAV in other investment funds must ensure that the investment funds in which they invest are prohibited from investing more than 30 per cent of their NAV in other investment funds; and
  • no more than 20 per cent of the NAV may be invested in unregulated, open-ended funds (this limit may be disapplied subject to further conditions in accordance with the requirements of the AIF Rulebook).

In addition, a RIAIF may borrow up to 25 per cent of its NAV but it is not permitted to offset credit balances against borrowings when determining the percentage of borrowings that remains outstanding. Repurchase or reverse repurchase contracts, securities borrowing or securities lending do not constitute borrowing for the purposes of the 25 per cent limit.

Unlike UCITS funds, RIAIFs are permitted to invest in certain types of alternative assets, such as real estate and hedge funds.

Tax treatment

What is the tax treatment of retail funds? Are exemptions available?

Irish retail funds are not subject to any Irish taxes on the income (profits) or gains arising on their underlying investments.

While dividends, interest and capital gains that the fund receives with respect to its investments may be subject to taxes, including withholding taxes, in the countries in which the issuers of investments are located, these foreign withholding taxes may, nevertheless, be reduced or eliminated under Ireland’s network of tax treaties to the extent applicable.

Asset protection

Must the portfolio of assets of a retail fund be held by a separate local custodian? What regulations are in place to protect the fund’s assets?

Yes, a retail fund must appoint a depositary located in Ireland. The depositary is responsible for the safekeeping of assets, cash monitoring and oversight duties. A depositary must be one of the following:

  • a credit institution;
  • an investment firm subject to EU capital adequacy requirements and authorised under MiFID; or
  • another category of institution subject to prudential regulation and ongoing supervision.

Under the AIFMD and the UCITS Directive, the depositary has restitution liability throughout the custody network for financial instruments lost while in custody and has or will have more prescriptive duties relating to daily monitoring of all cash flows, reconciliations and verifications, due diligence and risk assessments, segregation arrangements and sub-custody oversight.


What are the main governance requirements for a retail fund formed in your jurisdiction?

Retail funds are - whether UCITS or RIAIF - broadly subject to the same governance requirements. The formalities of registration and incorporation are discussed in question 12. Each of the legal structures available in Ireland is required to have detailed and accurate records kept in order to be able meet their relevant statutory and regulatory obligations. Irish UCITS funds must comply with the record-keeping requirements set out in the UCITS Regulations and Irish AIFs and Irish AIFMs must comply with the provisions of the AIF Rulebook.

Irish retail funds are required to have independent fund administrators appointed who are authorised and supervised by the Central Bank. In addition, UCITS funds and RIAIFs are required to have depositaries appointed for the purposes of holding the assets of the UCITS or RIAIF in custody in accordance with the requirements of the UCITS Regulations and the Irish AIFMD Regulations. A depositary of a RIAIF or QIAIF must enquire into the conduct of Irish corporate respective UCITS and RIAIFs or the management companies or general partners of non-corporate UCITS and RIAIFs in each annual accounting period and report thereon to the investors via a depositary report included in the annual report of the UCITS or the RIAIF.

Throughout the life of the relevant retail fund, there will be ongoing filing obligations to be made with the Central Bank and other relevant statutory authorities (ie, Companies Registration Office and the Irish Revenue Commissioners (tax authority)).

In addition to complying with regulatory obligations imposed by the UCITS Regulations or the Irish AIFMD Regulations, or both, management companies to UCITS funds, AIFs, self-managed UCITS funds and internally managed AIFs in Ireland are also required to comply with and adhere to the requirements of the Central Bank’s ‘Fund Management Company - Guidance’ published in December 2016 (the Guidance). The Guidance details the Central Bank’s requirements with respect to the following matters:

  • delegate oversight;
  • organisational effectiveness;
  • directors’ time commitments;
  • managerial functions;
  • operational issues; and
  • procedural matters.

All Irish UCITS and RIAIFs that are structured as corporate entities (ie, ICAVs and PLCs) are required to have a minimum of two Irish-resident directors and an Irish corporate secretary. The directors of an Irish corporate UCITS or RIAIF or the management companies or general partners of non-corporate UCITS and RIAIFs are required to comply with the Central Bank’s Fitness and Probity Standards issued under section 50 of the Central Bank Reform Act 2010 and must be pre-approved by the Central Bank.

Applications to become a director of a UCITS or RIAIF or a management company or general partner of non-corporate UCITS and RIAIFs must be made to the Central Bank via an online individual questionnaire (IQ). The IQ application requires applicant directors to provide detailed information on their educational and professional experience and expertise together with, inter alia, details of the proposed time commitment (in days) that they will provide per year in respect of that directorship. In addition, the appointing entity, in validating the IQ, is required to confirm its expectation regarding the proposed director’s time commitment per year.

Finally, corporate UCITS and RIAIFs or the management companies or general partners of non-corporate UCITS and RIAIFs are recommended to adhere to a voluntary corporate governance code for funds put in place by the Irish Funds Industry Association at the request of the Central Bank.


What are the periodic reporting requirements for retail funds?

Retail funds are required to publish an annual audited report for each financial year and an unaudited semi-annual or half-yearly report. The annual report for UCITS funds must be published within four months of the year end (six months in the case of RIAIFs) and the semi-annual report must be published within two months of the period end. Both must be sent to the Central Bank and must also be offered free of charge to investors before the conclusion of a contract and supplied free of charge to investors upon request.

Issue, transfer and redemption of interests

Can the manager or operator place any restrictions on the issue, transfer and redemption of interests in retail funds?

For retail funds, there is a general entitlement to refuse an application for shares or units at the discretion of the board of directors or the fund or the relevant management company. In addition, shares or units may not be issued to the following persons:

  • those located in jurisdictions where the fund cannot be sold or marketed;
  • those who do not provide anti-money laundering or counter-terrorist financing documentation; or
  • those that would cause negative legal, tax or regulatory consequences for the fund or other investors.

For UCITS funds, there are no redemption restrictions other than gating the fund in certain prescribed circumstances or suspending it in more extreme cases.

A closed-ended RIAIF does not facilitate redemption requests during the life of the RIAIF. Fund documentation may also provide for temporary suspension in specified circumstances. The Central Bank must be notified immediately of any such suspension.