Irish Domiciled Funds Structuring Options Independence Commitment Expertise
Introduction Mike Kirby Managing Principal, KB Associates 2
EUR Billion 2500 Irish Domiciled Funds Total Net Assets 2000 1,899 2,085 2,097 1,664 1500 1,227 1,344 1000 646 748 964 1,055 500 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 Irish Fund Structure Unit Trust/CCF Corporate Vehicle (ICAV/PLC) Management Company Self-Managed (SMIC) External/Third Party Proprietary Platform Management Company External/Third 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 Pension Dutch Pension South African Pension Operationally Inefficient: Multiple Structures Multiple Manager Appointments Multiple Service Providers (Admin, Custody, Tax & Audit) Tax Efficient: US Equities US Equities US Equities UK/US Preferential WHT Rate Dutch/US Preferential WHT Rate South African/US Preferential WHT Rate 17
CCF Introduction Traditional Pooling UK Pension Dutch Pension South African Pension Operationally Efficient: Single Structure Irish/Lux Investment Fund US Equities Tax Inefficient: US WHT Rate @ 30% Single Manager Appointment Single Set of Service Providers (Admin, Custody, Tax & Audit 18
CCF Introduction Solution The CCF UK Pension Dutch Pension South African Pension Operationally Efficient: Single Structure Single Manager Appointment CCF Share Class 1 Share Class 2 Share Class 3 Single Set of Service Providers (Admin, Custody, Tax & Audit) Tax Efficient: US Equities UK/US Preferential WHT Rate Dutch Preferential WHT Rate South African/US Preferential WHT Rate 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 Centennial Towers, West Bay, PO Box 31249, Grand Cayman, KY11205 Cayman Islands Tel: +1 345 525 4224 5 George s Dock IFSC Dublin 1 Ireland Tel: +353 1 668 7684 42 Brook Street London W1K 5DB United Kingdom Tel: +44 203 170 8814 www.kbassociates.ie info@kbassociates.ie 23