The New Fundesliga: Ireland overhauls private fund rules

January 26, 2021

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2 min read

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What's going on here?

Ireland’s Investment Limited Partnerships Act 2020 (ILP) has changed the country’s rules concerning private funds.

What does this mean?

Ireland’s new ILP legislation overrides the existing legislation to enable the establishment of special investment partnerships.

With 560 international managers using the country as their base, Ireland is currently Europe’s second-largest centre. However, in recent years it has been competing with Luxembourg, a nation that has gained a large number of new business from private managers, as Ireland’s regulations were considered too restrictive. Even the state-owned Ireland Strategic Investment Fund has opted to use Luxemburg-domiciled vehicles to finance some of their projects.

However, Ireland’s new ILP structure does not have legal personality and each investor would become a limited partner, minimising the personal risks. This allows for more flexibility.

What's the big picture effect?

Ireland has seized on the fact that private fund managers based in the UK will lose their passporting rights in the wake of Brexit. Passporting rights allow firms registered in the European Economic Area to trade freely with any other EU state without the need for further authorization from each country.

A large number of the European private equity managers based in London will need these passporting rights which will make Ireland a viable alternative. Despite Ireland having 18% of European funds businesses, it does not include private equity business because of the country’s restrictive legislation, the new legislation is expected to dramatically change this. It is likely that alternative investment managers from around the world will also use Ireland as a base for their European operations.

These relaxed regulations are expected to propel Ireland to become a leading international fund domicile for fund managers. It is thought the new partnership structure will create thousands of jobs, in addition to the 16,000 employees in Ireland’s fund industry and will enable long-term investments in growing sectors such as renewable energy. Pat Lardner, Irish Funds’ chief executive, asserts Ireland will develop “as a centre for green financing”.

Report written by Hanna Tesfazghi 

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