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Welcome – I am here today to discuss recent and long awaited changes to the Investment Limited Partnership legislation and am joined by Breda Sullivan, Head of Depositary Europe, and Ian Dillon, Partner, Asset Management & Investment Funds at Arthur Cox.
Ian, we know that recent changes to the Irish Limited Partnership legislation provide structuring flexibility and segregation of liability along with easing of provisions related to the operation of the Limited Partnership agreement. The ILP now compares favorably to partnership structures that exist in Luxembourg, Delaware, Guernsey and Cayman. U.S. Bank supports partnership structures in each of these jurisdictions and has done so for many years but in your experience, what will influence the jurisdictional decision for clients now that Ireland is in the mix?
I think the most significant thing achieved by the new legislation is choice. Prior to this point, managers needing an EU partnership structure would have been somewhat limited in how or where those structures were established, often leading to more complex structures over two or more jurisdictions with perhaps an Irish ICAV and SPV but a Lux or other jurisdiction partnership.
We now have in Ireland a partnership offering that allows managers to streamline their product structures into a single jurisdiction should that be what they wish.
And there will be a number of factors at play in that decision, such as where they see the service provider expertise for their particular products, what structures and legal system are on offer, for example US managers may have a preference for corporates and a common law system that more closely track their own, and their investor base will of course have views as well, with large institutional investors have a preference for the regulated structure due to limitations on their exposure to unregulated funds.
And in reality it’s not really about which jurisdiction is better or worse or what are the differences because they are now considerably fewer, it’s about a more level playing field that means you can look at your product, perhaps the location of your AIFM, your favored service provider and know that your entire structure can be established and managed, including whatever regulatory notifications and reporting are required, in a simplified, single jurisdiction.
Ian, I would agree that the ILP has now provided jurisdictional choice to Managers My observation is that there are lots of similarities between the ILP structuring and other collective investment schemes established in Ireland which Managers who already have product here will be familiar with and recognise.
The depositary duties applicable to an AIF derive from both AIFMD and the CBI rulebook but the core duties of the Depositary are the same whether you service a qualifying investor (QIAIF) ILP or a QIAIF ICAV. Key aspects for Managers to note applicate to the QIAIF ILP is that there are no investment restrictions imposed by the CBI and no leverage limits other than the leverage requirements under AIFMD. Certain assets classes will require a pre-submission to the CBI but the QAIF avails of a 24 hour approval process which is helpful when the Manager is focused on speed to market. Importantly for Managers to note also, with an EU AIFM in the structure the ILP can avail of the AIFMD marketing passport which provider greater reach to EU institutional investors.
We are already seeing significant interest in the product, and of course we are working with the US Bank folks on one large ILP launch we all hope to complete in very short order.
In our discussion with clients and prospects considering the ILP it’s interesting to hear the same themes in terms of asset classes, Private Equity, Private Credit and Debt, real asset and IP interests – very much the traditional private fund asset classes but I would be interested Linda and Breda to know what your teams have seen.
Then also, what sort of factors are managers considering when choosing a jurisdiction, what issues do they have – basically what problems are we solving for them and am I right? Does the ILP solve at least one issue?
It’s exactly as you have both said, It is about choice. We are seeing that since so many differences have been removed there are less reasons to have to compromise when considering the very things you mentioned Ian. In fact Our experience to date has been that many managers may still be considering the merits of a particular structure or jurisdiction when they initially speak to us so there is a comfort in knowing that their service partner has the ability to support them wherever their decision takes them. Technology that supports the characteristics of partnership accounting both for portfolio and investors is critical. Waterfall calculations, excuse and exclude provisions etc. all require a robust and well-established technology solution. An experienced team is also critical. This can be a challenging asset class but with the right technology in place, an experienced operations team can really make a difference to a manager’s investors and back office.
I would agree there are significant benefits to engaging a provider who can offer a one stop shop solution. This includes the provision of banking services to the GP, administration and depositary services with experience in servicing partnership with capital accounting in closed ended structures and loan administration services via U.S. Bank Corporate Trust all under the one roof. This integrated model ensures the information flows works smoothly between the functional areas with automation and interconnectivity already built in. The model also tends to be more attractive economically for the manager versus the costs incurred in engaging a range of service providers.
Thank you, Ian and Breda, for sharing your insights, and we hope you found it both interesting and beneficial. Thank you for listening in.
Ireland recently implemented an Investment Limited Partnership (ILP) amendment introducing various “safe harbors” for limited partners (LPs). In this video, our panel of experts explores these new opportunities and examines what support you should look for from your service provider. Participants include: