European investors in private markets now have access to a new vehicle domiciled in Ireland, allowing them to invest more easily in these asset classes.
The framework is provided by Ireland’s Investment Limited Partnerships (Amendment) Act 2020, which modernises the existing law to create a new investment limited partnerships (ILP) structure, aligning it with international standards for private equity funds.
The intention is to make this the vehicle of choice for institutional investors in private equity, private debt, renewables and real assets.
The legislation, which took five years to reach the statute book, is expected to strengthen Ireland’s position as a financial hub, creating 3,000 jobs by 2025 and attracting €20bn per year in global private capital, while expediting the green recovery.
Under the new regime, ILPs – which are intended to incorporate “best in class” features – may be open-ended, limited liquidity or closed-ended, and are authorised and regulated by the Central Bank of Ireland.
One major advantage of the new framework is that ILPs may be formed as an umbrella structure, i.e. with multiple segregated liability compartments (sub-funds). This will allow managers to accommodate different strategies and investor types within one overall architecture, while still preserving segregation of liability.
The Act also provides a list of activities which limited partners can perform – such as serving on an advisory committee of the ILP – without losing limited liability status. Normally, taking part in the management of a limited partnership would risk losing this.
Furthermore, institutional ILPs –“qualifying investor alternative investment funds” – may use a fast-track approval procedure taking 24 hours.
And ILPs can migrate into Ireland from other jurisdictions bringing their track record with them, while their own rules in the previous jurisdiction will continue to apply.
Meanwhile, Ireland has now established itself as a funds hub, offering a range of services supporting funds domiciled in the country but investing in other asset classes and via other forms – for instance, exchange-traded funds.
Pat Lardner, chief executive officer of Irish Funds, which represents the international investment fund community in Ireland, said: “The new structure will enable European pension funds to access less liquid and more specialist assets. It has the additional benefits of a common law framework and the confidence that comes with the structure being regulated and compliant with the Alternative Investment Fund Managers Directive (AIFMD) – especially relevant for trustees.”
He added: “It may be that ILPs underpin part of the alternatives or illiquid strategies being pursued in multi-asset and default investment choice funds. With the range of providers of investment solutions and intermediaries across the EU, they will help branded and white-labelled offerings alike.”
Lardner also observed that the timing of the new framework is apposite, given the need for financing to support businesses and economies as they emerge from COVID-19.
He said: “The ILP will be a strong mechanism to enable sophisticated investors such as pension funds to deploy their capital into areas such as infrastructure, social housing, healthcare, broadband and alternative energy as well as the wider transition to a greener economy and greater carbon neutrality.”
The expectation is that the first ILP launches under the new Act will occur in the first half of this year.