Fund Management Companies in Ireland
Ireland is a leading location for fund management companies and investment firms. More than 90 MiFID firms, 200 AIFMs and over 100 UCITS ManCos, are attracted by the numerous advantages Ireland has to offer as a domicile for cross border asset and fund management.
Licensing options in Ireland
Managers seeking authorisation in Ireland can seek to become authorised as:
a UCITS Management Company
an Alternative Investment Fund Manager (AIFM)
a “Super ManCo” (namely a dual authorised UCITS Management Company and AIFM); or
a MiFID Investment Firm
Other options for managers include: a self-managed undertaking for collective investment in transferable securities; or an internally managed alternative investment fund, although these options are becoming less common and practical.
The key factors in determining which licence is appropriate for a particular manager’s business include:
the types of activities in which it wishes to engage
what functions it wishes to delegate
the number of funds managed/ their domicile
Establishing a Super ManCo may be an attractive option for a manager that is seeking to manage and sell funds throughout the EEA on a passporting basis while also allowing for the provision of ancillary MiFID add-on services of portfolio management, investment advice and receipt and transmission of orders.
Becoming authorised as a Super ManCo would enable the manager to passport both UCITS funds and alternative investment funds (AIFs) throughout the EU, while avoiding the need to establish a separate UCITS ManCo or AIFM as well as a separate fully-fledged MiFID firm. On the other hand, obtaining a full licence under the MiFID regime may prove more attractive to a manager seeking to engage in a broader range of activities.
The level of resourcing needed depends on the type of licence being sought as well as the nature, scale and complexity of the proposed business. Resourcing requirements will therefore vary on a case-by-case basis dependent on the specifics of the application. Before granting a licence, the Central Bank will need to be satisfied that the management company or investment firm will have adequate levels of staff and expertise to carry out its proposed activities. In essence, this means that the entity in Ireland must be:
adequately resourced with a sufficient level of senior management
decision-making must take place in Ireland; and
the risks associated with the entity’s business must be governed, managed and mitigated by the Irish entity and its staff.
For UCITS management companies, AIFMs or Super ManCos which do not have MiFID “ancillary permissions”
The Central Bank has issued extensive guidance on fund management company requirements. This guidance sets out the roles, responsibilities and expectations in relation to directors and “Designated Persons”, including location requirements of these key personnel. “Designated Persons” (or DPs) are the individuals to whom the board of directors delegate the monitoring and oversight of the day-to-day managerial functions of the fund management company.
In addition to the requirements set out in the fund management company guidance, the Central Bank may impose additional resourcing requirements on a case-by-case basis, depending on the nature, scale and complexity of the proposed application. This will be considered in a preliminary meeting with the Central Bank.
For MiFID entities and Super ManCos with ancillary permissions
Resourcing requirements are agreed with the Central Bank on a case-by-case basis and depend on nature, scale and complexity.
Which activities can be delegated?
ESMA recognises that delegation is “a key feature of the investment funds industry and that the flexibility to organise centres of excellence in different jurisdictions has contributed to the industry’s success”. However, it expects those arrangements to be appropriately managed and controlled and to be fully compliant with all regulatory requirements. Moreover, outsourcing cannot result in the manager becoming a letterbox entity or limit the Central Bank’s ability to effectively supervise the firm. The Central Bank will require that full responsibility is retained and oversight is carried out in Ireland, but does not usually require the performance of all day-to-day activities in Ireland, provided that they are properly overseen in Ireland. Furthermore, AIFMD specifies that an AIFM is not permitted to delegate both the risk management function and the portfolio management function entirely. This is an area that continues to draw ongoing attention under the AIFMD review.
Ireland’s full membership of the EU means that MiFID investment firms, UCITS funds and AIFMs established in Ireland benefit from the right to passport services across the EU.
Why Ireland for Management Companies
The level of resourcing needed in Ireland depends on the type of licence being sought as well as the nature, scale and complexity of the proposed business.