Top-Tips for Start-Up Managers
Prospective new investment managers coming to market will be faced with an array of key decision points such as: (i) where to set-up; (ii) fee structures in mind; (iii) what is the right type of fund structure and liquidity terms that fit best with your strategy; and (iv) what is “sellable” based on your anticipated investor demand.
Here are some top-tips to consider to ease the initial stages of the journey.
What should we consider in relation to the Investment Manager?
1. Business Model
Key Points | Tips & Considerations |
Licensing | Analyse the pros and cons for either (i) establishing your own management company licensed by your home regulator in its own right; or (ii) engaging a third-party management company to provide your entity with the benefit of its licence. |
Fees | Consider the fees in going solo versus the fees for engaging a third-party management company. |
Market access | Consider if the chosen business model provides the required access to your target investors (eg consider if access to an EU marketing passport is required and does your choice of location affect that). |
Other | Think about if there may be any potential impact upon your control of the business and external investor perception in both business models. |
For the remainder of this article we focus mainly on the own manager set-up.
2. Operational infrastructure
Key Points | Tips & Considerations |
Business location |
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Office space |
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Other |
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3. Branding
Key Points | Tips & Considerations |
Business name |
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Name availability |
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4. Substance / Staffing
Key Points | Tips & Considerations |
Regulatory requirements |
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Staff / resource |
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Other |
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5. Governance
Key Points | Tips & Considerations |
Regulatory Requirements |
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Board composition |
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Composition |
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Clear reporting lines |
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6. Delegation / Outsourcing / Passporting / Other
Key Points | Tips & Considerations |
Delegation |
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Outsourcing | Research any local requirements around the outsourcing of key functions (eg in Ireland, the CBI published guidance in the form of their CBI Outsourcing Discussion Paper6 ) |
Passporting / marketing |
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Other | Consider potential regulatory requirements in the areas such as (i) prevention of money-laundering; (ii) cyber security; (iii) data protection and data retention requirements. |
7. Ongoing Requirements
Key Points | Tips & Considerations |
Local requirements | Consider any ongoing local regulatory requirements, in particular filing requirements. |
Ongoing fees |
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Evolving regulatory landscape | Consider the potential for changes in law/regulation that may affect the management company both at domestic and EU level (eg changes in capital requirements); with this, consider potential fees involved for, eg, having to appoint further resources. |
What about the Fund?
1. Target/Seed Investors and Investment Policy
Key Point | Tips & Considerations |
Investors | Consider who your target investors are and whether they may have specific interests/expectations in terms of overall fund strategy, policy etc. |
Investment policy |
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2. Fund Formation
Key Point | Tips & Considerations |
Type of fund |
Consider what fund structures are available together with associated regulatory requirements. Take into account your target investors also, as this could dictate the type of fund structure you should look at setting up. For example, in Ireland the two main investment fund types are:
QIAIFs: for professional investors; there are no investment or borrowing restrictions; minimum subscription is €100,000 (or foreign currency equivalent); UCITS: for retail investors; investment and borrowing restrictions exist. |
Legal structure |
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3. Authorisation Timing
Key Points | Tips & Considerations |
Regulatory Requirements |
Consider local regulatory timeframes that may exist for fund authorisation and take note of any personal timeframes in mind or expectations of potential seed investors.
For example, in Ireland, the following timelines typically apply: QIAIF: can be authorised typically within 24 hours (following completion of appointment of board members and service providers, CBI fitness and probity due diligence (mentioned at point D.1), all party agreement as to terms and conditions, agreements, etc, which could take 2-3 months ). UCITS: usually 3-4 months, following an iterative process with the CBI. |
Other | Good strong open relationships with the chosen service providers can prove extremely beneficial in ensuring a smooth authorisation process (from initial engagement, negotiation of contracts, appointment upon authorisation and thereafter). |
4. Governance /Service Providers / Marketing
Key Points | Tips & Considerations |
Governance |
Similar considerations as per 6. Delegation / Outsourcing / Passporting / Other above may apply.
Consider board composition and any associated regulatory requirements (eg in Ireland, a fund board must have two (2) Irish resident directors and a minimum of one independent director). Also think about the management company board composition and how is best to ensure effective independent governance. Having a majority of independent directors could be appealing to investors. |
Service Providers |
If you have no specific parties in mind, research the market. Test the reputation of the parties and their ability to deliver a quality service but also provide value for money.
Consider any regulatory requirements (eg in Ireland, an Irish regulated fund is required to appoint an Irish Administrator, Depositary, Auditor and Company Secretary). Bear in mind the Outsourcing point in 6. Delegation / Outsourcing / Passporting / Other above in terms of a strong and transparent relationship with the chosen parties. |
Marketing |
Think about where you want to market the fund and regulatory requirements around passporting or distributing the fund there.
Consider local registration requirements and fee requirements (eg fees involved in getting fund documents translated together with local registration fees). Further to Service Providers (immediately above), query whether this service could be provided by the chosen service providers. |
5. Ongoing Requirements
Key Points | Tips & Considerations |
Local requirements |
Consider any ongoing local regulatory requirements (eg regulatory filing requirements).
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Ongoing fees |
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Evolving regulatory landscape | As per 7. Ongoing Regulatory Requirements - Evolving landscape above, bear in mind potential changes in law/regulation that may affect the fund at both a domestic and EU level; with this, consider potential fees involved for, eg having to update fund documents, together with any local regulatory filing requirements. |
Next Steps
As a starting point, reach out to various parties in the industry to get more information. Take note of two final key tips:
- The right legal counsel: It is important that you select the right law firm to support your business journey from inception and beyond start-up. Beyond providing sound legal guidance, the right firm should have a good overview of regulation but also market terms as they evolve, within and beyond Ireland, and have relationships with other service providers and contacts within the industry which it can leverage to your advantage. International coverage is also a significant advantage.
- The right service providers: Consider seeking advice from counsel and explore their relationships/experience to date with service providers in the market. Get recommendations and second opinions.
Why Choose Ireland?
A responsible, regulated, on-shore jurisdiction, Ireland is always first in class in terms of the adoption and implementation of global, regional and/or multilateral legal, regulatory and taxation related initiatives.
There are many reasons why Ireland ranks as the first choice for start-up managers; below is a snapshot:
- Sound and robust regulatory framework: founded on principles of openness, transparency and investor protection/robust and efficient regulation, which facilitates market and product developments while protecting investor interest/accessibility and responsiveness with the CBI.
- Attractive tax regime: internationally recognised as a highly efficient tax jurisdiction – Irish regulated funds are exempt from Irish tax on income and gains derived from their investments and are not subject to any Irish tax on their net asset value.
- International reach and recognition: committed member of the EU providing full market access/major hub for cross-border distribution.
- Top Calibre Service Providers: highly experienced service providers (depositaries, administrators, auditors, legal advisers); excellent operational infrastructure (specialists in IT and telecommunications and data protection).
- Specialist Workforce: favourable demographics and excellent educational system; plentiful supply of top quality people with young, highly skilled workforce with a positive, can-do work attitude.
More information for asset managers
For more information and resources for asset managers, click here, or contact one of the co-authors.
James McKnight, Managing Associate, and Liane Müllers, Supervising Associate, Simmons & Simmons
1Companies Registration Office Ireland webpage: https://www.cro.ie/
2 CBI Fund Management Companies – Guidance: https://www.centralbank.ie/docs/default-source/regulation/industry-market-sectors/funds/ucits/guidance/fund-mancos-guidance.pdf?sfvrsn=4
3 CBI Fitness and Probity for Regulated Financial Service Providers: https://www.centralbank.ie/regulation/how-we-regulate/fitness-probity
4 Corporate Governance Code for Collective Investment Schemes and Management Companies: https://files.irishfunds.ie/1432820468-corporate-governance-code-for-collective-investment-schemes-and-management-companies.pdf
5CBI webpage on Investment Manager & Investment Advisor: https://www.centralbank.ie/regulation/industry-market-sectors/funds-service-providers/investment-manager-and-investment-advisors
6CBI discussion paper on Outsourcing – Findings and Issues for Discussion: https://centralbank.ie/docs/default-source/publications/discussion-papers/discussion-paper-8/discussion-paper-8---outsourcing-findings-and-issues-for-discussion.pdf?sfvrsn=12
7 CBI webpage on Additional Supervisory Levy: https://www.centralbank.ie/regulation/how-we-regulate/fees-levies/additional-supervisory-levy
8 CBI Guidance on the Industry Funding Levy: https://www.centralbank.ie/regulation/how-we-regulate/fees-levies/industry-funding-levy/guidance