Irish Domiciled Funds Structuring Options Independence – Commitment – Expertise
Introduction Mike Kirby Managing Principal, KB Associates 2
Irish Domiciled Funds Total Net Assets 2500 2,097 2,085 2000 1,899 1,664 EUR Billion 1500 1,344 1,227 1,055 964 1000 748 646 500 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year 3
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Structuring Options Overview Barry Harrington Director of Consulting Services, KB Associates 5
Overview Key fund structuring considerations • Fund structuring variables; • Domicile, Regulatory status, Legal form, Liquidity, Share class design Principle fund structuring options • Relative merits of the structuring options • Pension fund opportunities - Why Common Contractual Funds are • gaining traction 6
Key Structuring Objectives Support investment strategy • Support distribution strategy • Achieve operational efficiencies • 7
Fund Structuring Variables - Domicile Key Jurisdictions • Cayman Ireland Luxembourg Requirements of institutional versus retail investors • Manager considerations • US/UK Managers have a traditional preference for Ireland as a European domicile 8
Fund Structuring Variables - Regulatory Status UCITS • AIFMD • Non-UCITS/Non-AIFMD • 9
Fund Structuring Variables – Legal Form Proprietary Management Unit Trust/CCF Company External/Third Party Self-Managed Corporate Irish Fund (SMIC) Vehicle Structure (ICAV/PLC) Proprietary Management Company External/Third Platform Party 10
Ireland’s Bespoke Corporate Fund Structure – The ICAV Ability to “Check the box” for US tax purposes • Avoids the need for compliance with Irish company law • requirements May produce sub-fund by sub-fund financial statements • Ease of change to constitutional documents - investor approval • not required 11
Fund Structuring Variables - Liquidity Terms UCITS • Daily Weekly Fortnightly AIFMD • A function of the asset class Daily/Weekly/Monthly/Semi-Annual/Annual (limited liquidity) 12
Fund Structuring Variables - Share Class Requirements differ between Retail and Institutional • Differentiating factors • Fees Currency Hedged v unhedged Accumulating v distributing Minimum investment amount 13
Principle Fund Structuring Options External/third party management company • Proprietary management company • Self-managed structure • Platform • 14
Relative Merits of the Structuring Options External/third party management company advantages Ease and speed of establishment • Elements of risk transferred to an outside party • No capital required • Proprietary management company advantages Clear demonstration of control • Clear demonstration of substance • Self-managed funds advantages Cost efficient • No external control issues • 15
Pension fund opportunities- Why Common Contractual Funds are gaining traction Irish regulated asset pooling fund structure available since 2003 • Unincorporated body established under a deed where investors are “co - owners” • of underlying assets which are held pro rata with their investment into the CCF, facilitating the application of tax treaty benefits at the investor level The UK equivalent is the TTF and the Luxembourg equivalent is the FCP • Benefits from Ireland’s competitive tax regime providing certainty, stability and • transparency Can operate under AIFMD or UCITS • May not be sold to natural persons • 16
CCF Introduction Existing Separately Managed Accounts/Funds UK US Equities Pension Dutch US Equities Pension South US Equities African Pension Tax Efficient: Operationally Inefficient: UK/US Preferential WHT Rate Multiple Structures Dutch/US Preferential WHT Multiple Manager Appointments Rate South African/US Preferential Multiple Service Providers (Admin, WHT Rate Custody, Tax & Audit) 17
CCF Introduction Traditional Pooling UK Pension Irish/Lux Dutch Investment US Equities Pension Fund South African Pension Tax Inefficient: Operationally Efficient: Single Structure US WHT Rate @ 30% Single Manager Appointment Single Set of Service Providers (Admin, Custody, Tax & Audit 18
CCF Introduction Solution – The CCF UK CCF Pension Share Class 1 Dutch US Equities Share Class 2 Pension Share Class 3 South African Pension Tax Efficient: Operationally Efficient: Single Structure UK/US Preferential WHT Rate Dutch Preferential WHT Rate Single Manager Appointment South African/US Preferential WHT Single Set of Service Providers Rate (Admin, Custody, Tax & Audit) 19
Conclusions Key Considerations when establishing a fund product: Appropriate legal and regulatory framework • Investor requirements and investment strategy Financial and tax factors • Tax efficiencies and cost of doing business Market and Distribution factors • Reputation, experience and efficiency of the fund domicile 20
Platform or Open Architecture ManCo Moderator: Mike Kirby , Managing Principal, KB Associates Speakers: Richard Grant , Chief Operating Officer, Veritas Asset Management Tom Berrigan , Managing Director, Davy Investment Fund Services Peter Northcott , Executive Director, KB Associates UK 21
Closing Remarks Mike Kirby , Managing Principal, KB Associates 22
KB Associates Offshore Fund Consulting 5 George’s Dock 42 Brook Street Centennial Towers, West Bay, PO Box 31249, IFSC London Dublin 1 W1K 5DB Grand Cayman, KY11205 Cayman Islands Ireland United Kingdom Tel: +1 345 525 4224 Tel: +353 1 668 7684 Tel: +44 203 170 8814 www.kbassociates.ie info@kbassociates.ie 23
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