On 20 October 2010, the Central Bank of Ireland (“Central Bank”) confirmed changes to the Irish qualifying investor fund (QIF) regime which broaden the category of permitted investors for QIF products and reduce the minimum initial subscription threshold for those investors. In addition, a number of further enhancements for Irish investment funds generally have also been agreed by the Central Bank. These developments follow consultation over the past number of months between the Central Bank, the Irish investment funds industry association (IFIA) and its member firms. An overview of the new provisions are as follows:
By way of background, non-UCITS investment funds targeted at high net worth investors may be established in Ireland as QIFs. These structures benefit from the automatic disapplication by the Central Bank of the general non-UCITS fund investment and borrowing restrictions and, accordingly, the Central Bank does not generally impose any investment concentration or leverage restrictions on QIFs.
Up to now, the minimum initial subscription threshold for eligible QIF investors had been set at €250,000. This has now been reduced to €100,000. In terms of the criteria defining the categories of eligible investors permitted to invest in QIFs, this had been based on a net worth test which had traditionally excluded investors other than natural persons with a minimum net worth (excluding main residence and household goods) in excess of €1,250,000 or institutions owning or invests on a discretionary basis at least €25,000,000. This quantitative net worth test has now been replaced with new criteria to establish eligibility, and the following are the new categories:
- An investor who is a professional client under 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 scheme; or
- An investor who certifies that they are an informed investor by confirming that (a) they have such knowledge of and experience in financial and business matters as would enable the investor to properly evaluate the merits and risks of the prospective investment; or (b) that the investor’s business involves, whether for its own account or the account of others, the management, acquisition or disposal of property of the same kind as the property of the QIF.
With respect to the list of investors exempt from the above criteria and the minimum subscription requirement, this list has now been extended by the Central Bank to include the promoter of the fund, an entity within the promoter’s group and certain employees of the promoter.
Finally, in an amendment to its QIF authorisation guidelines, the Central Bank has confirmed that extensions to a QIF initial offer period where no subscriptions have been received at the date of the proposed extension need now only be submitted to the Central Bank on an annual basis (previously this had been quarterly).
The additional flexibilities which have been introduced open QIFs to a broader investor base and complement the attractive 24 hour regulatory turnaround time for QIF authorisations. These developments will be of interest to promoters of proposed and existing Irish QIF structures. In particular, it is anticipated that these amendments will enhance the attractiveness of the QIF product for fund promoters who are considering the re-domiciliation of previously unregulated funds to Ireland under the recently enacted Irish redomiciliation provisions. These provisions permit the migration of funds from the Cayman Islands, British Virgin Islands, Jersey, Guernsey, Bermuda and the Isle of Man.
LISTING OF PERMITTED MARKETS FOR RETAIL FUNDS
The Central Bank has modified Guidance Note 1/96, with the result that it is now no longer mandatory for details of permitted markets to be listed in the constitutional document of an investment fund. Instead, these can be included in the prospectus with the constitutional document citing the appropriate cross reference to the prospectus.
VALUATION OF FUND ASSETS
Up to now, the minimum frequency at which dealing days must be provided for UCITS had been set at “fortnightly” within the Central Bank guidance. Additional flexibility has now been implemented through Guidance Note 1/00, which instead now requires dealing "twice per month at regular intervals". The reference to "regular intervals" is to ensure that dealing days take place on both a regular and frequent basis and not, for example, on consecutive days.
This briefing provides a broad summary of the matters referred to herein. Should you wish to discuss this information in further detail, please do not hesitate to get in touch with your usual contact in the Asset Management and Investment Funds Group.
Full details of the Asset Management and Investment Funds Group, together with further updates, articles and briefing notes written by members of the Asset Management and Investment Funds team can be accessed at www.mop.ie.