The Central Bank of Ireland (CBI) has recently published a public consultation (CP60) on the implementation of the Alternative Investment Fund Managers Directive (AIFMD).

The consultation and the implementation of the new AIFMD rules will be of significant interest to all parties involved in the operation of Irish authorised non-UCITS funds. The consultation period ends on 11 December 2012.

It is proposed to replace the existing Qualifying Investor Fund (QIF) regime with a new Qualifying Investor Alternative Investment Fund (QIAIF) regime. Similarly, retail non-UCITS funds will in future be authorised as Retail Investor Alternative Investment Funds (RIAIF).

Principal proposals affecting QIAIFs/ RIAIFs

The proposals set out in the CBI’s CP60 include the following significant changes for the purposes of the new QIAIF regime:

QIAIF - removal of promoter requirement

The CBI is now proposing to eliminate the promoter approval process and instead to place reliance on the Alternative Investment Fund Manager (AIFM) taking into account the obligations on AIFMs under the AIFMD.

QIAIF - side-pockets

The CBI is considering the possibility of allowing QIAIFs greater scope to establish side-pockets. It is proposed that QIAIFs will be permitted to purchase assets and immediately place those assets in side-pockets.

QIAIF - initial offer periods

The CBI is considering a proposal to permit QIAIFs which are established for private equity funds or real estate funds to establish an offer period of up to 2 years (extending the current one year maximum).

QIAIF - removal of prime broker requirements

Under the proposed new AIFM handbook specific prime broker and counterparty credit rating requirements previously included in the CBI’s prime broker guidance note would no longer apply and instead the new provisions would be consistent with the AIFMD requirements.

QIAIF - removal of specific QIF rules

Under the proposed AIFM handbook a number of regulatory notices applying to QIFs would be removed including:

  1. Property fund restrictions;
  2. Venture capital fund restrictions; and
  3. Futures and options schemes.

RIAIF – raising of key investment limits

The CBI is proposing to raise key limits on investments in unlisted securities, single issuers and other investment funds for RIAIFs.

RIAIF – widening of eligible assets

It is proposed that RIAIFs be permitted to have at least the same ability to invest in derivatives as UCITS.  In addition, the CBI is considering proposals to allow RIAIFs to invest in gold and other commodities.

Change in regulatory framework

At the moment the requirements of the CBI with regard to non-UCITS are set out in its NU notices and related guidance notes.  It is proposed to replace these with a single AIF handbook.

The AIF handbook would contain the following six chapters:

  1. RIAIF Requirements;
  2. QIAIF Requirements;
  3. AIFM Requirements;
  4. AIF Management Company Requirements;
  5. Fund Administrator Requirements; and
  6. AIF Depositary Requirements.

Improving the attractiveness of Ireland as a fund centre

The proposals set out by the CBI in its new consultation paper will serve to significantly increase the attractiveness of Ireland as a centre for the establishment of non-UCITS funds.

The removal of the promoter requirement, together with the other changes, should act as a spur to attract greater investment in Irish non-UCITS funds.