Ireland has long been renowned as a key location for asset management. It offers a full suite of locally domiciled solutions and acts as a gateway to Europe for asset managers. It is also the fastest growing major European domicile for funds and accounts for 19.1% of all European fund assets1.
As of October 2023, there were 8,764 regulated investment funds domiciled in Ireland, with net assets totaling over €3.8 trillion2.
Similarly, in an unregulated context, assets held by Irish special purpose vehicles reached the highest amount on record in Q3-2023, when they surpassed €1.1trillion3.
An international hub with broad appeal
Ireland is a major hub for cross-border distribution and Irish funds are sold in 90 countries across Europe, the Americas, Asia and the Pacific, the Middle East and Africa. Over 1,000 fund promoters have chosen Ireland to domicile and/or service their fund structures4.
Housing traditional ‘long-only’ to more bespoke alternative vehicles, and everything in between, Ireland offers innovative product solutions to cater to a broad range of investment strategies.
Meeting complex and changing needs
Ireland continues to prove popular as a domicile in the alternatives space and is at the forefront of product innovation to cater for the more complex needs of this sector.
While the Irish Collective Asset-management Vehicle (ICAV) and Section 110 company remain the most popular Irish regulated and unregulated structure, respectively, the broader product suite in Ireland has continued to develop and expand to meet the changing needs of the industry.
Along with having access to the EU market, which provides a number of regulatory and tax benefits, fund managers can rely on a diverse product suite in Ireland. This can be serviced locally by an experienced 'ecosystem' of high-quality service providers.
The Irish tax regime has been, and continues to be, one of the key growth drivers of the funds industry in Ireland. It’s supported by Ireland’s extensive and expanding double tax treaty network, which includes over 70 treaty partners.
Recent international trends
Globally, the continuing evolution of the alternative fund industry is fuelled by:
changing investor preferences
an increasing focus on sustainability
regulatory requirements
technological disruption
volatility in international markets.
In response to some of these macroeconomic trends, the Irish alternatives sector has continued to change and grow to meet the market needs. Its growth reflects broader global market trends, where there has been a noted increase in allocations to private markets.
Strategies housed within Irish alternative funds span hedge funds, private equity, private debt, infrastructure and real estate, as well as numerous aircraft leasing and shipping funds.
Recent notable developments – the Irish perspective
Product update: Investment limited partnership reform
Amendments to the legal and regulatory framework governing the Irish regulated partnership offering has significantly enhanced Ireland’s offering for asset managers seeking to set up an onshore private fund.
As an AIFMD-compliant and EU-domiciled common law partnership, the investment limited partnership (ILP) has become Ireland’s flagship partnership vehicle for use as an investment fund.
ILPs are typically selected by managers availing of closed-ended strategies in real estate, private equity, credit, infrastructure, sustainable finance and related asset classes.
Investor demand for exposure to these asset classes clearly continues to grow, particularly in the institutional space. There, the illiquidity premium and long-term nature of the investment strategy are often aligned to the investment objectives of institutional investors such as pension funds, sovereign wealth funds and insurance companies.
Transparent structures can lend themselves well to these initiatives as they facilitate direct exposure to the underlying asset class for an investor.
Furthermore, the ESG agenda more broadly requires a departure from the status quo in terms of structuring new products. Increasingly, investors expect asset managers to incorporate ESG principles into their investment strategies. This is having an impact on which product and domicile is chosen to house these strategies. The updates to the ILP regime significantly enhance Ireland’s product suite for private fund managers at a time when an onshore regulated jurisdiction is of increased importance.
The increasing allocations towards private assets, coupled with the ESG agenda, has fuelled growth in Irish partnership structures, in both regulated (the ILP) and unregulated form (commonly referred to as a 1907 Limited partnership).
Reform to the Irish holding company
Confirmation from the Department of Finance that a territorial tax regime will be introduced for Ireland from 2025 is a welcome development for the Irish asset management industry. This new system will reform the Irish holding company structure, which will further enhance the Irish product suite.
European long-term investment funds (ELTIF)
Last year, in response to limited growth in the ELTIF market, the European Union adopted a revised regulatory framework for ELTIFs (commonly referred to as ‘ELTIF 2.0’).
ELTIF 2.0 is proving to be an attractive product to fund promoters and aligns with the EU’s policy priorities of channelling capital towards European long-term investments in the real economy.
Addressing the ESG agenda, the long-term nature of ELTIFs complements the return profile of large-scale infrastructure products, which will be required for the transition to a greener economy. With global climate action plans such as the EU climate action plan spanning a number of years, investments must do the same. This makes the ELTIF a suitable investment vehicle.
Additionally, the ELTIF will give retail investors a new way to invest in private and long-term investments, which was not feasible for them under existing fund structures in Ireland. This is timely, in the context of the broader ‘retailisation’ trend within the alternatives sector, as the structure is designed to facilitate retail investment into private assets.
The Central Bank of Ireland (CBI) is updating its rules and authorisation process for establishing an ELTIF in Ireland. The new framework will enable Ireland to compete with other EU jurisdictions such as Luxembourg, France and Italy to be a popular location to establish an ELTIF.
Under the current proposal, the CBI has indicated ELTIFs will be authorised under the existing Irish investment fund legislative framework5. Accordingly, the appropriate tax regime should align with that which currently applies to the existing suite of regulated products, ensuring an Irish ELTIF can be established as a tax-efficient asset pooling structure.
Ireland as a hub for sustainable finance
The area of sustainable finance continues to evolve to meet the needs and expectations of a broad stakeholder group, including investors, policy makers, regulators and society more generally, in addition to asset managers. Private markets exist to mobilise private finance for long-term infrastructure projects linked to climate and are expected to be a funding mechanism for such investments.
Ireland has positioned itself as a world leader in sustainable finance, having developed the talent, knowledge and product suite needed to harness this market opportunity. Furthermore, its reputation as an onshore EU domicile with a robust regulatory and tax framework has ensured the sector is well positioned to capitalise on the broader ESG opportunity.
Funds Sector 2030: Sectoral review
Recognising the important role asset management and fund servicing have played in the success of the international financial services industry in Ireland over many years, the Irish Minister for Finance, Michael McGrath TD announced a review of the funds sector on 6 April 20236.
The stated aim of the review is to ensure the sector remains resilient, future-proofed and a continued example of international best practice. Key objectives include:
developing a framework within which Ireland can maintain its leading position in fund management and fund servicing
ensuring the sector continues to support economic activity at both regional and national level in Ireland.
This is a positive development and demonstrates the commitment to the sector from a government policy perspective. The review seeks to ensure Ireland will continue to be at the forefront of international asset management and fund servicing.
Technology and innovation
Technology is also disrupting the asset management industry, improving how investments are traded, securities are held and contracts are settled. These changes challenge traditional infrastructure and force industry players to adapt to technology to facilitate alternative processes, while regulators must simultaneously navigate innovation and protection. The industry must respond appropriately.
The Irish asset management industry has recognised technology is key to responding effectively to the sector’s increasing regulatory, reporting and efficiency demands. A vibrant and expanding indigenous sector of fintech and regtech services continues to develop. It supports the Irish asset management ecosystem, harnessing Ireland’s position as a leading domicile in fund services as well as a key location of choice for the largest global technology companies.
Looking to the future
Ireland has long been renowned as a centre of excellence for investment funds and the location of choice for international asset management firms to establish operations and to domicile funds.
Shifting investor demands, increased onshoring, regulation, the ESG agenda and the outcome of the Funds Sector 2030 Review will all continue to shape the Irish alternative funds industry.
Enhancements to the ILP product, reform of the holding company structure and the proposed amendments to the Irish ELTIF framework all significantly enhance Ireland’s product suite for private fund managers when tailored investment structuring really matters.
A ‘one size fits all’ approach to structuring investment in private assets will be unsustainable into the future. Consequently, it’s crucial to have a full product suite available to enable the adoption of a tailored approach.
From an ESG perspective, Ireland is viewed as a global centre of excellence for sustainable finance and continues to be a key enabler in mobilising private finance (including blended finance solutions) to fund the transition to net zero and sustainability more broadly.
The broader asset management infrastructure and ecosystem will need the flexibility to service these tailored solutions in an efficient and tech-enabled way. Ireland’s flourishing fintech sector will prove important in this regard.
Continual evolution is needed to meet the needs of an ever-changing market and the developments outlined above support Ireland’s commitment to doing so.
1EFAMA Investment Fund Industry Factsheet December 2022
2https://www.irishfunds.ie/facts-figures/industry-statistics/total-irish-domiciled-funds/
3https://static1.squarespace.com/static/61c73890f0872428c1077ab6/t/658254d01ff7056d2df94076/1703040210097/Irish+SPV+Report+-+Q3+2023.pdf
4https://cdn.irishfunds.ie/x/4b95011afa/2023-05-6709-irish-funds-why-ireland-2023-euro-web.pdf?_gl=1*jdvvqu*_ga*MTkwMzg5MTEyMi4xNzA1MzQ2MzM4*_ga_M4G8XK9Q1L*MTcwNTM0NjMzOC4xLjEuMTcwNTM0NjM1Mi40Ni4wLjA.
5CP155 - Consultation paper on ELTIF chapter in the AIF Rulebook
6Funds Sector 2030: A Framework for Open, Resilient & Developing Markets
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