The Central Bank of Ireland (the Central Bank) has substantially modernised and simplified its rulebook governing Irish regulated AIFs and AIFMs (the AIF Rulebook), representing a significant milestone for Ireland’s alternative funds industry. The publication of the revised AIF Rulebook follows on from a collaborative consultation between the Central Bank and the Irish funds industry and introduces several reforms which will be welcomed by private/ alternative fund managers and sponsors alike. 

In addition to aligning the Irish regime with AIFMD 2.0,¹ several longstanding restrictions that previously constrained the structuring and operation of Irish-domiciled qualifying investor alternative investment funds (QIAIFs) have been removed or modernised. The most notable areas of reform, particularly for private fund managers and sponsors, relate to loan origination, borrowing capabilities and the use of intermediary investment vehicles. Positive changes have also been made to retail investor alternative investment funds (RIAIFs), European long-term investment funds (ELTIFs), AIFMs and AIF depositaries. The key changes are summarised below.

Direct lending 

The Central Bank has removed the domestic loan origination QIAIF regime from the AIF Rulebook. This is a significant development for private fund managers and sponsors as it harmonises the Irish framework with AIFMD 2.0 which now provides a single, directly applicable regime for loan-originating AIFs across the EU. 

In practice, this means that Irish-domiciled QIAIFs engaging in loan origination will no longer be subject to a separate, Ireland-specific set of rules. This will simplify the regulatory landscape for managers and sponsors structuring direct lending strategies through Ireland and will level the playing field in Europe more broadly.

The AIF Rulebook provides that non-EU AIFMs may now manage closed-ended loan origination QIAIFs, subject always to compliance with the relevant provisions of the AIFM Regulations.

Borrowing capabilities

The previous prohibition on a QIAIF acting as guarantor for third parties has been removed (a restriction which was considered out of step with market practice by limiting the ability of QIAIFs to provide downstream financing or credit support within their investment structures). The new ability for QIAIFs to participate in cross-collateralised borrowing arrangements within their investment structures is a significant development, which will simplify fund financing arrangements.

Intermediary investment vehicles 

The AIF Rulebook now introduces an “intermediary investment vehicles” framework, which expressly covers special purpose vehicles, aggregators, subsidiaries and co-investment structures used by a QIAIF to implement its investment strategy. 

The previous regime required Central Bank approval for subsidiaries and mandated that QIAIF directors form a majority of the subsidiary board. This could be operationally burdensome and did not reflect the typical governance arrangements of private fund special purpose vehicles and holding structures. 

These requirements have been replaced by a regime focussed on disclosure, due diligence and ongoing oversight, giving fund managers and sponsors considerably greater flexibility in how they structure their investments through intermediary investment vehicles. The reform brings the Irish position more closely into line with the approach taken in other European jurisdictions.

Fund and share class features

The AIF Rulebook now expressly provides for a variety of features commonly used by private funds, including capital commitments, side letters, differentiated investor participation (including excuse and exclude rights), and management participation for carried interest purposes.

The AIF Rulebook further clarifies that QIAIFs (open-ended, open-ended with limited liquidity and closed-ended) may allocate assets at a share class level, provided the arrangement; (i) is not made for the purposes of pursuing a separate investment objective of that share class, (ii) does not result in a share class operating as a de facto separate sub-fund, and (iii) is not created to circumvent other requirements of the AIF Rulebook.  

Controlling shareholdings

The AIF Rulebook has been updated to remove the previous rule which restricted QIAIFs from acquiring shares carrying voting rights which enable them to exercise significant influence over the management of an issuing body. This is a welcome reform particularly for managers and sponsors pursuing private equity strategies.

Liquidity management tools

The AIF Rulebook now incorporates provisions aligning product-level rules with the new requirements of AIFMD 2.0 in relation to the selection, disclosure and use of liquidity management tools in respect of open-ended and open-ended with limited liquidity QIAIFs.

Warehousing

The previous requirement for a QIAIF not to pay more than the current market value for warehoused assets has also been removed, subject to prospectus disclosure. 

ELTIFs and RIAIFs 

The ELTIF chapter of the AIF Rulebook has been updated to incorporate relevant updates from the QIAIF chapter, as well as to align with AIFMD 2.0.

Targeted changes have been made to the RIAIF framework to align with AIFMD 2.0 requirements. The Central Bank has indicated that further and more substantive changes to the RIAIF framework will also be considered as part of a proposed broader review of Ireland’s AIF framework. 

Conclusion

Taken together, the revisions to the AIF Rulebook represent a meaningful modernisation of the Irish AIF regime. The changes to the loan origination framework, borrowing capabilities and intermediary investment vehicle structures further enhance Ireland’s competitiveness as a domicile for private credit, private equity and real assets strategies.
 

^{1 Directive (EU) 2024/927 of the European Parliament and of the Council of 13 March 2024}