Changes To The Irish Qualifying Investor Fund Regime

Author:Mr Stephen Carty
Profession:Dillon Eustace
 
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  1. Introduction

    Following a process of consultation between the Irish

    Financial Regulator and the Irish Funds Industry Association

    ("IFIA"), a number of important positive changes have

    now been introduced to the regime for the authorisation and

    regulation of Qualifying Investor Funds ("QIFs").

  2. QIFs - Background

    A QIF is a non-UCITS product regulated in Ireland by the

    Financial Regulator which can be structured as an investment

    company, unit trust, investment limited partnership or common

    contractual fund (single portfolio or umbrella with segregated

    liability). QIFs have a minimum subscription requirement per

    investor of €250,000 (or equivalent) and can be sold only

    to qualifying investor individuals with a minimum net worth of

    €1.25 million (excluding principal private

    residence/contents) or institutions who own or invest on a

    discretionary basis at least €25 million (or are

    themselves owned by qualifying investors).

    The Financial Regulator will authorise a QIF for marketing

    to investors one business day after the submission of formal

    approval documents. The approval documents are submitted on a

    self-certification basis and promoters and their legal advisors

    must confirm they meet legal and regulatory criteria.

    QIFs structures give promoters the opportunity to use Irish

    regulated investment vehicles for a complete range of different

    fund types depending on the requirements of their targeted

    investors. The absence of investment and borrowing restrictions

    and immediate authorisation process means that QIFs are the

    vehicles which are most frequently used in the alternative

    investment space - hedge funds, fund of hedge funds, venture

    capital/private equity, real estate funds, etc - and are a

    mainstay of the non-UCITS Irish domiciled product offering.

    These latest changes to the regime and revised regulatory

    provisions relating to QIFs are further evidence of the ongoing

    steps being made by the Irish investment funds industry to

    provide a dynamic environment for regulated funds.

    It is anticipated that these changes, which are summarised

    below, will enhance Ireland's appeal as a domicile for a

    broad range of investment funds.

  3. Summary of Changes

    Investment in Collective Investment Schemes -

    Increased Limits and Changes to Disclosure Requirements

    A QIF fund of funds is now permitted to invest up to 50% of

    its net assets in any one unregulated collective investment

    scheme. This represents an increase from the previous 40%

    limit, contained in Guidance Note 1/01. Consequently, a QIF

    which is a fund of funds may invest up to 100% in unregulated

    collective investment schemes, subject to a limit of up to 50%

    of its net assets in any one unregulated collective investment

    scheme.

    Additionally, a QIF will only be considered to be a feeder

    fund (and therefore subject to the prospectus disclosure

    requirements, outlined in Non-UCITS Notice 22, paragraphs 2 and

    3) if it has as its principal objective the investment in

    another single fund.

    The net effect of this is that a QIF will be permitted to

    invest above 50% in a regulated collective investment scheme

    and, provided investment in such scheme is not its principal

    investment objective, it will be able to do so without being

    required to (i) give details on the underlying fund in its

    prospectus; (ii) attach the underlying fund's accounts to

    the fund's accounts; (iii) disclose in the prospectus

    details of the...

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