Authorisation of AIFMs & AIFs - PE & VC funds | KPMG | IE

Authorisation of AIFMs & AIFs - PE & VC funds

Authorisation of AIFMs & AIFs - PE & VC funds

Do I apply for full authorisation or registered AIFM status?


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Authorisation of AIFMs & AIFs - PE & VC funds

Do I apply for full authorisation or registered AIFM status?

The directive provides for two types of regulatory status for AIFMs:

AIFMs above a certain threshold level need to be authorised. Fully authorised AIFMs are subject to all of the directive’s requirements but can benefit from the marketing and management passport throughout the EU AIFMs below the threshold level (“sub-threshold”) only need to be registered. Registered AIFMs are subject to minimum requirements but cannot avail of the marketing and management passport.

Those PE and VC firms, which are deemed to be “ sub-threshold”, only need to be registered AIFMs but some may chose to voluntarily opt to become authorised in order to obtain the marketing and management passport. The choice is essentially theirs - if they wish to do business across Europe then they should opt in.

What then defines “sub-threshold”?

A sub-threshold AIFM is a fund manager whose assets under management do not exceed:

  • €500 million, provided the fund is not leveraged and the investors have no redemption rights for the first five years; or 
  • €100 million, including all leveraged assets.

It is estimated that the €100 million threshold level would make about 30 percent of AIFMs who manage almost 90 percent of assets in EU-domiciled AIFs funds, subject to the full requirements of the directive.

What minimum requirements are on a registered AIFM?

A registered fund manager will have to register with the Central Bank of Ireland, provide details of its investment strategy, periodic updates of the main assets held and particularly any breaches of the minimum threshold.

If a fund manager does breach the threshold and this is considered likely to continue for three months, then he has 30 days to seek full authorisation under the directive.

How do I apply for authorisation or registration?

The application process is relatively straightforward. Once a fund manager is incorporated in any EU country that has transposed the directive into its own law, he can be authorised in that country and can obtain a marketing and management passport throughout the EU for his funds.

As indicated earlier, if a registered fund manager does not opt for authorisation he is not eligible for a marketing and management passport and will have to rely on private placement for distribution of his funds. Alternatively, the fund can be designated as a venture capital fund under the EuVECA rules, a designation that is only available to registered fund managers. This is discussed later in chapter seven.

The fund manager must then submit the application to the Central Bank of Ireland including a document detailing its organisational structure and how it intends to comply with the provisions of the directive. The application will also need to include details on the fund manager’s remuneration policy, minimum capital and financial projections and information on the funds it plans to manage.

As with other financial institutions regulated by the Central Bank of Ireland, directors of an AIFM will be subject to the regulator’s standard fitness and probity regime.

What is a QIAIF and what are its main features?

A Qualifying Investor Alternative Investment Fund (QIAIF), the successor to the Qualified Investor Fund (QIF) is a regulated, specialist investment fund targeted at professional and institutional investors, who must meet minimum subscription and eligibility requirements.

A QIAIF comes within the definition of an AIF under the terms of the directive and is therefore required to designate an AIFM fund manager. For retail investors, there is an alternative fund, the Retail Investor Alternative Investment Fund (RIAIF).


  • Are not subject to borrowing or leverage limits 
  • Are not subject to any regulatory diversification requirements 
  • Must appoint a regulated fund manager 
  • Can be open-ended, open-ended with limited liability, have limited liability or be closed-ended and may provide for carried interest or waterfall payments.

Unlike its predecessor, the QIF, the QIAIF has a number of enhancements of particular interest to PE and VC firms, including:

  • They can use bridge financing - this is of particular interest to PE funds 
  • There is no minimum viable size rule for property funds 
  • The initial offer period for property and PE funds has been extended from one to two years 
  • There are new rules on partly-paid units - this is of particular benefit for PE and property funds.

Who should invest in a QIAIF?

QIAIFs are sophisticated investments and are targeted at the professional investor. They are not appropriate for small retail investors and require a minimum subscription of €100,000 - or €500,000 if the QIAIF invests more than 50 percent of its net assets in unregulated funds.

Entry requirements

Investors in a QIAIF must be either:

  • A “professional client” as defined in the MiFiD directive 
  • An investor who has received an appraisal from a EU credit institution, MiFiD firm or UCITS provider that the investor has the required expertise, knowledge and experience to understand the investment 
  • An investor who self-certifies himself as an informed investor with the knowledge and experience to evaluate the risks involved, and who provides confirmation that his business involves management of assets similar to that managed by the AIFM fund manager.

How is a QIAIF managed?

The Central Bank of Ireland requires a QIAIF to have at least two Irish resident directors while the appointment of a management company or general partner is a mandatory requirement if the QIAIF is structured as a limited partnership.

What is a start-up QIAIF?

New QIAIFs (but not RIAIFs) authorised after 22 July 2013 are permitted to have a registered fund manager instead of a fully authorised fund manager. This regime gives start-up AIFMs establishing a fund time to grow their assets before they become subject to the full requirements of the directive. Within two years, or when the fund’s assets exceed the directive’s thresholds - whichever is sooner - a fully authorised AIFM must be appointed to the fund.

Applying to the Central Bank of Ireland for authorisation

The establishment of the legal arrangements underpinning a QIAIF normally takes a number of weeks to complete. This involves the formation of the limited partnership, completing the agreements with the various service providers and preparation of the prospectus and accompanying documentation. Once all this is in place and all the service providers have been approved by the Central Bank of Ireland, then QIAIFs can avail of a 24-hour fast track approval process.

What documentation does the Central Bank of Ireland require?

The Central Bank of Ireland will require the following documentation for approval of a QIAIF structured as a limited partnership:

  • Prospectus 
  • Constitutional documents such as the limited partnership agreement 
  • Administration agreement 
  • Depositary agreement 
  • Investment management agreement 
  • Prime brokerage and sub-custodian agreement (where applicable) 
  • Distribution agreement (if applicable) 
  • QIAIF application form 
  • Ancillary documentation for general partner/AIFM /depositary.

Listing funds on the Irish Stock Exchange

Once the Central Bank of Ireland has authorised a QIAIF, the fund meets most of the listing criteria of the Irish Stock Exchange, if a public listing is considered to be of benefit.

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