The Central Bank of Ireland (Central Bank) issued a Consultation Paper (CP85) for a new loan fund product structured as a Qualifying Investor Alternative Investment Fund (QIAIF) which will be available to EU and non-EU AIFMs. As far as we are aware, this will be the first regulatory regime in the EU for loan funds, structured to avail of the AIFMD’s Europe-wide marketing passport for professional investors. The Central Bank will permit such QIAIFs to derogate from its general prohibition on lending, subject to specific investor protections, leverage, risk management and reporting rules.
The Central Bank is consulting on ten specific areas:
- Credit assessment granting and monitoring
- Diversification (a 25% issuer limit is proposed)
- Liquidity (QIAIF must be closed-ended though investors will be allowed to request (but not require) redemptions in certain instances)
- Due diligence
- Leverage (a 200% of NAV limit is proposed)
- Investor disclosures
- Interconnectedness with the banking sector
- Reporting and stress testing
Loan origination to natural persons, the AIFM, the depositary, delegates, other CIS, financial institutions and other investment businesses will not be permitted. The proposed rules to apply to a loan originating QIAIFs will be included in a revised Chapter 2 of the AIF Rulebook and are set out at the end of the Consultation Document. The consultation will close on 25 August 2014.