Overview of the Irish Funds Industry

Ireland is regarded as a key strategic location by the world’s investment funds industry. Investment funds established in Ireland are sold in over 70 countries across Europe, the Americas, Asia, Africa and the Middle East. As of July 2016 there were 6,284 Irish domiciled funds with net assets of over €1.9trn.

While the majority of these fund assets are held in UCITS funds, Irish-domiciled AIFs had in excess of €460bn in net assets as of July 2016 (representing significant growth in the size of alternative investment funds since the introduction of AIFMD in 2013). The majority of the investments in these regulated investment funds comes from non-Irish institutional investors.

Fund Financing and Security

Overview

Lending to Irish funds is typically structured as either a bilateral or syndicated facility, a note issuance agreement whereby the issuer (the fund) issues a note in favour of the note holder or a derivative contract, typically documented through an ISDA Master Agreement. Lending by AIFs is restricted, although it is possible to establish an AIF which is focused on loan origination, including investing in loans.

In the last number of years capital call, subscription and equity bridge facilities have become much more commonplace. Irish fund structures, particularly Investment Companies, ICAVs and ILPs, are also commonly used as property investment vehicles.

The Lenders and Governing Law

At present the majority of deals in the Irish market are being financed by international financial institutions. Reflecting the international nature of the financiers, the relevant loan agreements for such transactions are commonly governed by the laws of New York or England and Wales, although there is no legal reason why they could not be governed by Irish law. The terms of the loan agreement will very much depend on the type of facility...