Investment fund managers operating in Ireland are anticipating changes to the regulatory framework governing their industry.
The Central Bank of Ireland (CBI) has initiated a consultation on proposed rule changes for Alternative Investment Funds (AIFs), with a focus on QIAIFs (Qualifying Investor Alternative Investment Funds) and loan origination funds. These changes aim to address risks arising from the growth of the less-regulated personal loans market and are designed to affect the transposition of AIFMD II in Ireland.
One of the key proposals is the removal of the requirement for directors of QIAIFs to comprise most of the board of the intermediary vehicle. This change is intended to enable more efficient use of QIAIFs for personal market investments.
The CBI has also proposed to remove the general restriction on QIAIFs on granting personal loans and acting as a guarantor for third parties. This move may assist in providing financial support to subsidiary vehicles, potentially reducing financing costs for QIAIFs.
Furthermore, the CBI has proposed to eliminate any 'gold-plating' of the EU rules that apply to loan origination funds in Ireland. This includes the removal of the domestic framework on loan origination funds, which may streamline the process for non-EU AIFMs managing Irish-domiciled loan-originating AIFs targeted at professional investors.
The proposed amendments to the AIF Rulebook will also allow for the removal of the requirement for equal treatment of unitholders in QIAIFs, allowing for side letter arrangements tailored to the needs of investors. Additionally, the CBI has proposed to remove the existing requirement for the initial offer period of QIAIFs implementing personal asset, loan origination, or real estate strategies to be no longer than two years and six months.
The CBI's proposals also impact fund financing arrangements, such as cross collateralisation and provision of broader and more comprehensive security for lenders. These changes may potentially reduce financing costs for QIAIFs.
Conor Durkin of Pinsent Masons commented on the CBI's proposals, stating that personal loans strategies can be efficiently managed within a QIAIF structure. Durkin also noted that the names of the AIFMs from the United Kingdom and the United States that are currently not approved by the Central Bank of Ireland to manage Irish-domiciled loan-originating AIFs for professional investors are not publicly disclosed.
Firms have until 5 November 2025 to respond to the CBI's consultation on the updates to its AIF Rulebook. The CBI's proposals are part of a broader EU effort to update the AIF Managers Directive (AIFMD) to regulate the activities of managers of loan originating funds. EU member states have until 16 April 2026 to transpose the reforms contained in AIFMD II into domestic legislation.
These proposed changes mark a significant shift in the regulatory landscape for QIAIFs and loan origination funds in Ireland, aiming to support the growth of the personal loans market while maintaining investor protection.
