Irish Investment Limited Partnership legislation: a brief overview

Ireland’s ILP legislation recently secured parliamentary approval, and newly incorporated fund structures are expected by early 2021. Learn how a provider with private fund servicing expertise can help global asset managers take advantage of emerging opportunities in this Irish partnership framework. 

More than 25 years ago, the Investment Limited Partnership Act 1994 established a regulated investment limited partnership structure in Ireland. Now, Irish Parliament recently passed the Investment Limited Partnership (Amendment) Bill 2020 (ILP) with an aim “to promote investment, secure Ireland’s competitiveness and enhance [its] regulatory environment in international financial services.”

Long-awaited, the ILP modernizes the applicable legislative framework and introduces a number of “safe harbors” for limited partners (LPs). This allows LPs to participate in advisory committees, vote on changes to the limited partnership agreement (LPA) and engage in other related activities without losing their limited liability status.

“Traditionally, most European Union (EU) closed-end private debt, private equity and hybrid funds opted to be set up as Luxembourg-based partnerships,” says Breda Sullivan, U.S. Bank head of Depositary Services Europe. “The features of the ILP structure are comparable to those in other jurisdictions – allowing Ireland to become a jurisdiction of choice for private equity, infrastructure and closed-ended funds.”

Below, we’ll explore the wide-reaching opportunities this presents.
 

Pan-EEA marketing passport potential

Irish lawmakers instituted the ILP as a European Economic Area (EEA) Alternative Investment Fund (AIF), which means the structure can use the pan-EEA marketing passport under the Alternative Investment Fund Managers Directive (AIFMD). Notably, this facilitates distributing the fund in the EEA and in wider-reaching investor markets, subject to qualifying regulatory equivalence.

Experts are optimistic about Ireland’s long-term success – and rightly so, given its historic attractiveness as an English speaking, common law jurisdiction and its scalable pool of experienced service providers.

 

 

As a point of comparison, look at growth for managers who structured partnerships in Luxembourg to benefit from the AIFMD passport. In 2020 alone, the total assets for those private debt funds grew by 36.2% (to EUR 108.4 billion).¹ Now that legislation has opened a new and competitive EU domicile choice, some estimates suggest Irish ILP assets could grow as high as EUR 20 billion in 2021.²

 

What benefits does the ILP offer to global asset managers?

Post-COVID-19 recovery planning demands sustainable strategies with significant long-term project funding requirements. In 2021 and beyond, these efforts will draw on private debt markets as leading sources of stable funding.

The ILP is ideally positioned to support these initiatives, given the following attributes:

• Structuring opportunities (segregated liability sub-funds in a single ILP umbrella structure)
• Suite of partner liquidity options (open end, limited liquidity, closed end)
• Efficient and cost-effective sub-fund formation, authorization and operations
• Simplified limited partner (LP) default provisions
• LP majority rule (LP not required to approve LPA amendments)
• Flexible investment restrictions, risk and leverage framework (favorable to private funds)
• Highly regulated product (AIFMD compliant) to underpin effective global fund raising
• Investment manager delegation permitted to U.S. and non-EEA managers, leveraging global expertise
• ILP general partner (GP) not required to be Central Bank of Ireland (CBI) regulated
• Requirement of an alternative investment fund manager (AIFM), which can be an already established Irish regulated management company or one established by the GP
   

What should you look for in service provider?

As legislation and the EU marketplace continue to evolve, you need a partner with strength and stability – but also flexibility. As a manager, you should examine your provider’s ability to support your needs both today and into the future.

If you’re looking to add ILP structures to your product suite, provider experience should be a top consideration. Look for an organization that has a successful history working with regulated alternative funds, including closed-end debt funds structured as partnerships in other domiciles.

“U.S. Bank is a leading provider of private equity and private credit services with a long-established track record and reputation in the U.S., Ireland and more recently, Luxembourg,” says Linda Gorman, chief executive officer of U.S. Bank Global Fund Services – Europe. “Presently, we support more than US$50 billion in called capital across these products – serviced by highly tenured specialist teams operating on a single global technology model. We’re delighted to have the opportunity to now add the ILP to our offering.”

It’s also important to find a partner that offers a wide range of services to handle a variety of needs. Select a provider that has a strong technology solution, an integrated, holistic infrastructure and a client-centric ethos so they’re well-positioned to address EU private funds structured as partnerships.

U.S. Bank now offers clients ILP services in addition supporting a broad range of other fund structure, domicile and strategy types. As new opportunities arise to add to your fund suite, position yourself for success with a team that offers end-to-end solutions and service expertise in custody, depositary, fund accounting, transfer agency and more.

 

To learn more about the ILP and our fund services offerings, visit our website or connect with our team.

 

¹Source: https://www.irishfunds.ie/news-knowledge/news/press-release-game-changing-irish-funds-legislation-to-create-3000-jobs

²Source: https://home.kpmg/lu/en/home/insights/2020/11/private-debt-market-survey-2020.html

 

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