The Hedge Fund Law Report

The definitive source of actionable intelligence on hedge fund law and regulation

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By Topic: Ireland

  • From Vol. 9 No.45 (Nov. 17, 2016)

    Dechert Partners Discuss Domiciling Funds in Germany or Ireland to Access the E.U. Post-Brexit, the Possible Introduction of PRIIPs and the Rising Prominence of UCITS Structures (Part Two of Two)

    Brexit looms at a time ripe with new opportunities and challenges for managers seeking to market in the E.U. and around the world. On the one hand, managers must reconsider the types of vehicles and jurisdictions to use to preserve access to the E.U. markets. Additionally, new legislation – such as the impending Packaged Retail and Insurance-based Investment Products (PRIIPs) initiative – may present new barriers to managers marketing in Europe. On the other hand, however, global markets are opening up as certain vehicles, such as Undertakings for Collective Investment in Transferable Securities (UCITS), are increasingly welcomed by local regulators. These issues were discussed at a seminar entitled “Current and Future Developments: UCITS, AIFs, Brexit and Global Fund Distribution,” presented by Dechert’s financial services group on October 13, 2016. Moderated by Dechert partner Chris D. Christian, the seminar featured partners Richard L. Heffner, Karen L. Anderberg, Marc Seimetz, Mark Browne and Angelo Lercara. This article, the second in a two-part series, describes the increased usage of UCITS structures and the potential effect of impending PRIIPs legislation, as well as options for managers to domicile a fund in Germany or Ireland to market in the E.U. The first article in the series analyzed Brexit’s impact on structuring considerations, as well as the viability of domiciling funds in Luxembourg to access E.U. markets. For further commentary from Dechert attorneys, see “The Current State of Direct Lending by Hedge Funds: Fund Structures, Tax and Financing Options” (Oct. 27, 2016); and “What the Evolving European Marketing Environment Means for Hedge Fund GCs and CCOs” (Nov. 12, 2015).

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  • From Vol. 9 No.39 (Oct. 6, 2016)

    Trends in Irish Fund Launches and the Challenges – and Solutions – for Non-E.U. Fund Managers Using These Vehicles

    Fund managers outside the E.U. are increasingly looking to Ireland’s thriving funds market as a way to access potential E.U. investors. Regulatory changes have allowed fund managers to take advantage of innovative approaches and strategies, resulting in record numbers of cross-border fund launches in the jurisdiction. A recent report published by Maples and Calder found, among other things, that there has been a sizable increase in Irish fund launches recently, along with a trend toward the use of tax transparent vehicles. This article analyzes the report, together with insight from partners at law firms at the forefront of fund interactions with Irish and E.U. regulators concerning how non-E.U. fund managers can circumvent obstacles – such as marketing, regulatory and remuneration issues – in order to take advantage of these vehicles. For more on issues pertinent to Irish fund vehicles, see “Walkers Fundamentals Hedge Fund Seminar Addresses Fund Structuring Trends, Governance Best Practices, Fee and Liquidity Terms, Irish Vehicles, Marketing in Asia and FATCA” (Feb. 12, 2015); and “Irish Central Bank Issues Proposed Rules to Enable Private Funds to Originate Loans” (Sep. 11, 2014). For additional insight from Maples and Calder, see “Tax, Legal and Operational Advantages of the Irish Collective Asset-Management Vehicle Structure for Hedge Funds” (Aug. 13, 2015); “Considerations for Hedge Fund Managers Evaluating Forming Reinsurance Vehicles in the Cayman Islands” (Sep. 4, 2014); and “Use by Private Fund Managers of the British Virgin Islands for Private Equity Fund Formation and Private Equity Investments” (Nov. 29, 2012).

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  • From Vol. 9 No.8 (Feb. 25, 2016)

    Operational Considerations Hedge Fund Managers Must Address When Redomiciling Their Hedge Funds (Part Two of Two)

    When making the decision to redomicile its hedge fund to a more favorable jurisdiction, a manager must consider more than the potential marketing or other advantages the move promises. Redomiciliation involves potential regulatory burdens, conflicts of interest and operational issues, including investor notification and redemption obligations. In a recent interview with The Hedge Fund Law Report, Jonathan Law and Donnacha O’Connor, partners at Dillon Eustace, discussed the prime reasons hedge fund managers consider redomiciliation of their hedge funds. This article, the second in a two-part series, details the potential drawbacks and operational considerations of redomiciliation. The first article addressed the regulatory implications of, and potential conflicts of interest inherent in, the decision to redomicile. For more on redomiciliation, see “Redomiciling Offshore Investment Funds to Ireland, the European Gateway” (Mar. 4, 2011). For additional commentary from Law and O’Connor’s colleague, Derbhil O’Riordan, see “Four Strategies for Hedge Fund Managers for Accessing E.U. Capital Under the AIFMD” (Feb. 13, 2014).

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  • From Vol. 9 No.7 (Feb. 18, 2016)

    Regulatory Considerations Hedge Fund Managers Must Address When Redomiciling Their Hedge Funds (Part One of Two)

    Hedge fund managers in search of marketing or other advantages may consider redomiciling their hedge funds to a more favorable jurisdiction. However, such managers must consider the implications of the move, including potential increased regulatory burdens and conflicts of interest created by the transition. In a recent interview with The Hedge Fund Law Report, Jonathan Law and Donnacha O’Connor, partners at Dillon Eustace, discussed the prime reasons hedge fund managers consider redomiciliation of their hedge funds, along with the legal and operational considerations that attend that decision. This article, the first in a two-part series, addresses the regulatory implications of, and potential conflicts of interest inherent in, the decision to redomicile. The second article will detail the potential drawbacks and operational considerations of redomiciliation. For more on redomiciliation, see “Benefits and Burdens of Redomiciling a Hedge Fund to an E.U. Jurisdiction” (Oct. 27, 2011). For additional insight from Dillon Eustace, see “Irish Central Bank Issues Proposed Rules to Enable Private Funds to Originate Loans” (Sep. 11, 2014).

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  • From Vol. 8 No.32 (Aug. 13, 2015)

    Tax, Legal and Operational Advantages of the Irish Collective Asset-Management Vehicle Structure for Hedge Funds

    The Irish Collective Asset-management Vehicles Act came into operation in March 2015 and allows for the creation of an innovative, tax-efficient corporate structure for Irish investment funds which sits alongside existing Irish fund structures.  See “New Irish Fund Structure Offers Re-Domiciliation Possibilities and Tax Advantages for Hedge Funds,” The Hedge Fund Law Report, Vol. 8, No. 10 (Mar. 12, 2015).  There has been widespread industry interest in the Irish collective asset-management vehicle (ICAV), with a number of leading asset managers such as Permal, Deutsche Bank and Legg Mason already having established ICAVs and a host of other asset managers in the process of either converting to or establishing new ICAVs.  Since the Central Bank of Ireland opened the ICAV register on March 16, 2015, there have been over 30 ICAVs authorized, representing in excess of $30 billion of inflows into Irish funds.  In a guest article, Ian Conlon of Maples and Calder explains the key features and advantages of the new ICAV structure and discusses how hedge fund managers can establish ICAVs, redomicile funds to Ireland and convert existing Irish fund vehicles so they can take advantage of the newly available structure.  For additional insight from Maples and Calder, see “Considerations for Hedge Fund Managers Evaluating Forming Reinsurance Vehicles in the Cayman Islands,” The Hedge Fund Law Report, Vol. 7, No. 33 (Sep. 4, 2014); and “Use by Private Fund Managers of the British Virgin Islands for Private Equity Fund Formation and Private Equity Investments,” The Hedge Fund Law Report, Vol. 5, No. 45 (Nov. 29, 2012).

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  • From Vol. 8 No.27 (Jul. 9, 2015)

    Irish Central Bank Issues Guidance on Fund Director Time Commitments

    The Central Bank of Ireland (Central Bank) recently announced recommendations regarding individuals holding numerous directorships and the satisfaction of their oversight duties.  This announcement follows a “thematic review” of the number of directorships held by individuals on the boards of Irish investment funds and fund management companies and assessment of the time allocated by such individuals to their service as directors.  This article explores the Central Bank’s recent letter to industry on the subject and its related Guidance on Directors’ Time Commitments.  For additional information on governance in the private fund space in general, and the roles of directors in particular, see “Walkers Fundamentals Hedge Fund Seminar Addresses Fund Structuring Trends, Governance Best Practices, Fee and Liquidity Terms, Irish Vehicles, Marketing in Asia and FATCA,” The Hedge Fund Law Report, Vol. 8, No. 6 (Feb. 12, 2015); and “Cayman Islands Government Introduces Bill That Would Require Registration and Licensing of Certain Hedge Fund Directors,” The Hedge Fund Law Report, Vol. 7, No. 12 (Mar. 28, 2014). 

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  • From Vol. 8 No.10 (Mar. 12, 2015)

    New Irish Fund Structure Offers Re-Domiciliation Possibilities and Tax Advantages for Hedge Funds

    The Irish Parliament recently passed legislation to provide for a structure specifically tailored to meet the needs of the global funds industry.  The legislation creates a new form of corporate vehicle for funds, known as the Irish Collective Asset-Management Vehicle (ICAV).  In addition to minimizing the administrative complexity and cost of establishing and maintaining a collective investment scheme in Ireland, the ICAV will be an “eligible entity” for U.S. tax purposes, allowing it to “check the box.”  It is anticipated that the ICAV will make it increasingly attractive for fund promoters to establish new corporate funds in Ireland or, allied with the user-friendly Irish re-domiciliation mechanism, to re-domicile offshore funds to Ireland.  See “Redomiciling Offshore Investment Funds to Ireland, the European Gateway,” The Hedge Fund Law Report, Vol. 4, No. 8 (Mar. 4, 2011).  The Central Bank of Ireland has recently confirmed that it stands ready and able to accept applications for ICAV structures within two weeks of the legislation being enacted.  In a guest article, Vincent Coyne, a Senior Associate in William Fry’s Asset Management and Investment Funds Department, first focuses on key tax considerations of the ICAV and the opportunities this creates for re-domiciling to Ireland, then examines the practical legal benefits of the new regime.

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  • From Vol. 8 No.6 (Feb. 12, 2015)

    Walkers Fundamentals Hedge Fund Seminar Addresses Fund Structuring Trends, Governance Best Practices, Fee and Liquidity Terms, Irish Vehicles, Marketing in Asia and FATCA

    Walkers Global recently held its Fundamentals Hedge Fund Seminar in New York City, where experts addressed a range of pressing issues in the industry, including recent developments in fund structuring and common Cayman fund terms; updates on fund governance regulations introduced by the Cayman Islands Monetary Authority and trends in hedge fund governance; implications of the Foreign Account Tax Compliance Act for hedge fund managers; and global hedge fund investment and regulatory trends, particularly in Asia and Ireland.  This article summarizes the key points discussed at the conference on each of the foregoing topics.  For the HFLR’s coverage of Walkers Fundamentals Hedge Fund Seminars from prior years, see: 2013 Seminar; 2012 Seminar; 2011 Seminar; and 2009 Seminar.

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  • From Vol. 7 No.34 (Sep. 11, 2014)

    Irish Central Bank Issues Proposed Rules to Enable Private Funds to Originate Loans

    Hedge funds domiciled in Ireland are often organized as Qualifying Investor Alternative Investment Funds.  See “Considerations for Launching Qualified Investor Funds in Ireland: An Interview with Pat Lardner, Chief Executive of the Irish Funds Industry Association,” The Hedge Fund Law Report, Vol. 5, No. 31 (Aug. 9, 2012).  Such funds have been prohibited from originating loans.  The Central Bank of Ireland, which regulates such funds, recently proposed rules that would permit such funds to originate loans and has solicited stakeholder comments on those rules.  The so-called Loan Originating Qualifying Investor Alternative Investment Funds would be permitted to originate loans under certain stringent conditions, including that the fund be closed-ended and that lending be its sole business activity.  See also “Allen & Overy Report Suggests that Pressure from New Regulations on Bank Lending May Create Additional Opportunities for Hedge Funds and Other Non-Bank Sources of Capital,” The Hedge Fund Law Report, Vol. 5, No. 48 (Dec. 20, 2012).  This article provides a detailed discussion of the Central Bank’s proposed rules on lending by private funds, and includes context and market color from Andrew Bates, a partner in Dublin-based Dillon Eustace.

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  • From Vol. 7 No.1 (Jan. 9, 2014)

    2013 Walkers Fundamentals Hedge Fund Seminar Highlights Trends in Cayman Fund Structures and Terms, Cayman and Irish Fund Governance Developments, Conflicts of Interest, Use of Advisory Boards and Fund Borrowing

    On November 5, 2013, international law firm Walkers Global held its annual Walkers Fundamentals Hedge Fund Seminar in New York City.  At the seminar, Walkers partners offered insights on trends in structures and terms for new funds organized in Cayman; developments in Cayman and Irish fund governance; regulatory focus on conflicts of interest; the use of advisory boards; and trends in fund borrowing.  This article summarizes key points raised during the seminar.  For the HFLR’s coverage of Walkers Fundamentals Hedge Fund Seminars from prior years, see: 2012 Seminar; 2011 Seminar; and 2009 Seminar.

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  • From Vol. 6 No.3 (Jan. 17, 2013)

    How Can Hedge Fund Managers Use Reinsurance Businesses to Raise and Retain Assets and Achieve Uncorrelated Returns? (Part Two of Two)

    Some well-known hedge fund managers have launched reinsurance businesses to address the twin challenges of raising capital and obtaining uncorrelated returns.  If properly structured and operated, reinsurance businesses offer hedge fund managers a steady stream of investable capital in the form of reinsurance premiums, which in turn can be invested in the manager’s other strategies.  However, few hedge fund managers start with the expertise or infrastructure necessary to launch and operate a reinsurance business effectively, and reinsurance businesses present unique challenges relating to people, risk management, structuring and regulation.  Moreover, running a reinsurance business alongside a hedge fund management business raises various compliance issues.  In short, launching a reinsurance business can help tackle some of the more elusive challenges facing hedge fund managers, but such launches entail risks to which managers typically are not accustomed.  To assist managers in capturing some of that upside while mitigating the risks, we are publishing this second article in a two-part series on the primary legal, business and risk considerations for hedge fund managers in launching reinsurance businesses.  In particular, this article discusses how hedge fund managers generally approach starting a reinsurance business; the best domiciles for reinsurers; a checklist of steps required to launch a reinsurance business; how hedge fund managers invest the “float” generated by such a business; conflicts of interest raised by a hedge fund manager’s side-by-side management of a reinsurance business and an investment management business, and how managers should address such conflicts; and policies and procedures that hedge fund managers should implement to accommodate the operation of a reinsurance business.  The first article in this series provided background on the reinsurance business; explained how reinsurers generate revenue; discussed how hedge fund managers can participate in the reinsurance business; and described some principal benefits and drawbacks of launching a reinsurance business.  See “How Can Hedge Fund Managers Use Reinsurance Businesses to Raise and Retain Assets and Achieve Uncorrelated Returns? (Part One of Two),” The Hedge Fund Law Report, Vol. 6, No. 2 (Jan. 10, 2013).

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  • From Vol. 5 No.31 (Aug. 9, 2012)

    Considerations for Launching Qualified Investor Funds in Ireland: An Interview with Pat Lardner, Chief Executive of the Irish Funds Industry Association

    The popularity of Undertakings for Collective Investment in Transferrable Securities (UCITS) funds as well as the impending effectiveness of the Alternative Investment Fund Managers (AIFM) Directive has heightened the popularity of Ireland as a domicile for organizing hedge funds and alternative retail funds.  In 2011, Ireland experienced net inflows of approximately €62 billion in assets in UCITS funds, approximately €50 billion more than the second-place domicile, representing 8 percent growth over 2010.  Additionally, according to figures from the European Fund and Asset Management Association and the Central Bank of Ireland (Central Bank), Ireland-domiciled non-UCITS funds have experienced considerable growth in recent years, up 35 percent in 2010; 15 percent in 2011; and 4.3 percent in the first quarter of 2012.  Assets in Ireland-domiciled non-UCITS funds are up from €200 billion in 2010 to €250 billion as of June 2012.  Additionally, as of June 2012, the number of qualified investor funds (QIFs) climbed to an all-time high of 1,420, and assets have grown to €182 billion.  In light of this growth and the consequent importance of Ireland as a hedge fund jurisdiction, The Hedge Fund Law Report recently interviewed Pat Lardner, Chief Executive of the Irish Funds Industry Association.  The general purpose of the interview was to enable Lardner to elaborate on considerations for hedge fund managers in establishing funds and managing investments and operations in Ireland.  In particular, our interview covered, among other things: the process for organizing a UCITS fund; the service provider and reporting requirements applicable to Irish UCITS funds; the comparative advantages and disadvantages of establishing UCITS funds in Ireland; measures taken to make Irish UCITS funds more attractive to Asian and Latin American investors; recent developments impacting the appeal of UCITS funds; common mistakes made in organizing UCITS funds; advice for managers establishing Irish UCITS funds; a description of the QIF regime and the organization and fund authorization process; who constitutes a “qualifying investor” eligible to invest in a QIF; governance, service provider, reporting and regulatory examination requirements applicable to QIFs; comparative advantages and disadvantages of the QIF regime; advice for fund managers looking to establish QIFs; the new SICAV corporate structure in Ireland; and various related topics.  This article contains the full transcript of our interview with Lardner.

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  • From Vol. 4 No.36 (Oct. 13, 2011)

    The Implications of UCITS IV Requirements for Asset Management Functions

    Undertakings for Collective Investment in Transferable Securities (UCITS) IV raised much industry debate prior to its introduction on July 1, 2011 across a number of areas.  Now, with the opportunity to begin assessing its implications in practice, it is likely that this debate will continue.  One area that is receiving increasing focus is the MiFID-esque conduct of business rules imposed on UCITS management companies (and self-managed UCITS) under the UCITS IV Management Company Directive.  In almost all cases at present, UCITS management companies (and self-managed UCITS) fully outsource the asset management function to one or more investment management firms.  These firms are now finding themselves directly subject to UCITS IV conduct of business rules.  So just how much will UCITS IV impact how investment managers manage UCITS?  In this article, Stephen Carty, a partner in the Dublin office of international law firm Maples and Calder, considers the new and enhanced policies and procedures that will be required as well as considering some of the practical implications.  In particular, Carty discusses: UCITS IV rules with respect to best execution, order handling and aggregation, due diligence and voting rights policies; the general absence of carve outs in UCITS IV; the lack of account in UCITS IV for the delegation model typical in the investment management field; and the differences in four important areas between UCITS IV and the MiFID regime.

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  • From Vol. 4 No.8 (Mar. 4, 2011)

    Redomiciling Offshore Investment Funds to Ireland, the European Gateway

    Alternative investment managers have increasingly chosen to domicile their funds in European jurisdictions in recent years rather than the Caribbean islands which have traditionally been the home domiciles for hedge funds.  Ireland has been a particularly significant beneficiary of this trend and the percentage of global hedge fund assets domiciled in Ireland has more than doubled over the last 18 months alone so that it now exceeds that of both Bermuda and the BVI.   Furthermore, recent industry statistics showed that 63 percent of European hedge funds were domiciled in Ireland, and this position as the dominant jurisdiction in Europe is continuing to grow.  In a guest article, Mark Browne, a Partner in the Financial Services Department of Mason Hayes+Curran, explores the key drivers behind the movement of offshore funds to Ireland and details the practical steps involved where an asset manager decides to redomicile an existing fund to that jurisdiction.

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  • From Vol. 4 No.7 (Feb. 25, 2011)

    Irish High Court Rules that Hedge Fund Investor Is Entitled to Seek a Report of Fund’s Operations Directly from Fund’s Depository Bank When the Fund Fails to Make That Report Available Per Applicable EC Disclosure Rules

    Plaintiffs in this action, Aforge Finance SAS and Aforge Gestion SAS (together, Aforge) were investors in non-party hedge fund Thema International Fund PLC (Thema or Fund).  Defendant HSBC Institutional Trust Services (Ireland) Limited (HSBC or Depository) served as the Fund’s depository.  The Fund apparently had a significant portion of its assets invested with Bernard Madoff.  After Madoff’s fraud was revealed, the Fund collapsed, losing substantially all of its assets.  HSBC, as one of the Fund’s depositories, was responsible for holding the Fund’s investments.  This action arose out of Aforge’s efforts to seek information about the Fund and its assets from HSBC.  Aforge claimed that it was entitled to obtain Fund information directly from HSBC.  A substantial part of Aforge’s argument rested on the theory that HSBC owed a fiduciary duty, and a corresponding duty to account, directly to the Fund’s investors.  Because it was organized in Ireland, the Fund was subject to the European Union’s Undertakings for Collective Investment in Transferable Securities Directive and the corresponding Irish implementing regulations (together, UCITS), which govern, among other things, disclosure by investment funds organized in the European Union.  UCITS requires a depository to make an annual report to the fund for which it holds assets.  In turn, the fund is required to make periodic financial disclosure to its investors, including the information contained in the depository’s report.  The Irish High Court, relying on the disclosure scheme mandated by UCITS, did not rule on whether a fiduciary relationship existed between HSBC and Aforge.  Instead, it determined that, because Thema failed to make the disclosures mandated by UCITS and, specifically, failed to provide HSBC’s requisite annual report, Aforge was entitled to seek that report directly from HSBC.  The Irish High Court refused to grant Aforge the right to seek any information beyond the information that HSBC was required to provide pursuant to UCITS.  We summarize the Court’s decision and its reasoning.

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