Since Ireland’s fund regulation reforms have been enacted, the country has provided an alternative to other fund jurisdictions. Sam Metland, head of private equity product, Citco (UK) Limited, highlights the case for managers to choose Ireland.

How have Irish fund regime reforms provided options for managers across Europe?

Sam Metland: Since the 2016 Brexit referendum, Luxembourg has become a major European hub for private equity, helped by an attractive regulatory regime, a highly-developed professional services industry and a lack of direct competition from neighbouring EU countries.

However, choice in the market has significantly improved in light of the recent Irish private funds reforms – which included the enacting of the Irish government’s Investment Limited Partnerships (Amendment) Act 2020 (ILP) and the Central Bank of Ireland’s revisions to its rules relating to closed-ended funds – both of which have made enhancements to the Irish private funds regime.

The ILP made a number of positive changes, including greater flexibility (for example, easier to replace a GP) and greater cost efficiency (for example, allowing multiple sub-funds within an ILP structure) for managers, and has positioned Ireland as the second-largest funds hub in Europe. 

What were some of the issues that impeded the number of managers choosing Ireland before the reforms, and have the reforms succeeded in removing those impediments?

Metland: The ILP underwent some reforms six or seven years ago but they did not go far enough. However, the most recent reforms allowed for real limited partnerships, with high degrees of tax transparency and including sub-funds, which has given Ireland the same flexibility found in Luxembourg. 

Alongside greater flexibility, the reforms also helped to modernise and improve the operations of ILPs.

There are still other regulatory factors that are yet to come into play, including the Alternative Investment Fund Managers Directive II (AIFMD II) and ongoing implementation of new ESG regulations, both of which will impact the market landscape, but such effects will be equally applicable to Luxembourg as they are to Ireland. Neither AIFMD II nor ESG will have the market-shifting impact of AIFMD or the Lux SCS as they are about incremental behaviour change and refinement.

Have you seen an increase in the number of fund managers picking Ireland since the reforms have been put into place?

Metland: We have seen a small increase but not a huge wave yet. The Luxembourg limited partnership (SCS) and the special limited partnership (SCSp) have been around for a while, so a wave of managers entering Europe chose Luxembourg because it was the only choice. This resulted in those managers also building the operational and regulatory infrastructure required in Luxembourg, which was a costly exercise.

Thus, if you already have limited partnerships in Luxembourg, you’re unlikely to move or decide to suddenly start launching all your new funds in Ireland because, presumably, you’re relatively happy with Luxembourg. 

However, we are seeing managers that are coming into the European private market space for the first time – either because they’re startups or US managers wanting to enter the market, or they’re hedge managers launching their first illiquid funds – choosing Ireland.

A distinct advantage to Ireland is that it remains committed to its EU membership yet retains its important position as an English-speaking gateway to one of the world’s largest markets. What’s more, Ireland is a common law jurisdiction, sharing common legal principles with the US and UK, within the broader framework of EU legislation.

Over recent years, Citco has seen an increase in demand for European distribution by our US clients, and Ireland is an attractive option for private markets managers to launch products onshore or within the European regime.

Do you believe that Ireland has the correct skills and expertise to compete with Luxembourg in terms of being a destination for fund managers?

Metland: There are two different forces at play around human resource availability. The first is that Luxembourg as a marketplace is saturated. It’s very difficult to hire enough good people to operate there and can be expensive in terms of salaries, office space, housing etc. The second problem is the level of expertise in Ireland to support growth in private markets funds. Seven or eight years ago, the level of private markets expertise in the Irish market was low across the board – whether it be administrators, lawyers, management companies, etc.

But during the last seven or eight years, there has been significant growth in private markets work being done in Dublin, in the administrators and in the managers. Today, Ireland has developed a significant workforce with private markets knowledge.

What can be done to increase Ireland’s attractiveness as a fund domicile of choice?

Metland: I think legislation-wise Ireland has caught up to the market expectations. The key differentiator between Luxembourg and Ireland could be the availability of people, talent and expertise. Such factors would encourage a manager to choose Ireland because there are more directors and administrators available, and they would be better supported. Managers who have (or will have) other investment strategies (hedge, retail etc) will be able to find synergies in the service providers, directors and lawyers who can support all their needs.

What are some of the ways that you are helping to increase that traffic towards Ireland as a fund manager destination?

Metland: Citco is agnostic to managers’ jurisdictional choices. If a manager wants to provide a Luxembourg fund or an Irish fund, we are happy to service either and we have the same systems and operating model globally. More specifically for managers choosing Ireland for the first time, our expertise in the jurisdiction – with more than 1,000 staff members and over 25 years operating in Ireland – means we are in a great position to help our clients make the most of choosing Ireland.

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