Mr. Colin Farrell
International Tax Partner

Colin is an international tax partner in PwC Ireland Asset and Wealth Management tax practice. He specialises in assisting asset managers structure regulated and unregulated products for all forms of asset classes in multiple domiciles with a specific focus on private equity and private debt as asset classes.

Colin regularly advises on the taxation implications of cross-border alternative investment structures as well as corporate group investments and divestments. Colin is the Head of Financial Services Tax for PwC Ireland and the PwC Ireland Financial Services tax policy leader.

He is an active member of the Irish Debt Securitisation Association tax working group and Irish Funds working group.

Ms. Laura McKeown
International Tax Director

Laura is an international tax director in the PwC Ireland Asset and Wealth Management tax practice with over 10 years experience in Financial Services.

Laura has a broad range of experience across the financial services sector and advises private equity funds, hedge funds, sovereign wealth funds and pension funds on international tax structuring projects. Laura regularly advises on the taxation implications of cross-border investment using all forms of Irish investment platforms including both regulated and unregulated fund and limited partnership structures.

Laura worked on the Irish tax desk in PwC New York where she advised Global asset managers and multi-national groups on Irish corporate and product tax structuring.

She is an active member of the Irish Debt Securitisation Association tax working group, the Irish Funds ELTIF working group and the Invest Europe Tax Committee working group.

Laura is a qualified Chartered Accountant with the Institute of Chartered Accountants in Ireland and a member of the Irish Taxation Institute.

Ireland well placed to meet growing demand for private assets

Ireland Overview

Ireland has long been renowned as a key location from an asset management perspective, offering a full suite of locally domiciled solutions and acting as a gateway to Europe for asset managers. It is the fastest growing major European domicile for funds and accounts for 19.1% of all European fund assets.¹EFAMA Investment Fund Industry Factsheet December 2022 As of October 2023, the total number of regulated investment funds domiciled in Ireland reached 8,764, with net assets totaling over €3.8 trillion.²https://www.irishfunds.ie/facts-figures/industry-statistics/total-irish-domiciled-funds/ Similarly, in an unregulated context, assets held by Irish Special Purpose Vehicles reached the highest amount on record in Q3-2023, surpassing €1.1trillion.³https://static1.squarespace.com/static/61c73890f0872428c1077ab6/t/658254d01ff7056d2df94076/1703040210097/Irish+SPV+Report+-+Q3+2023.pdf Ireland is a major hub for cross border distribution and Irish funds are sold in 90 countries across Europe, the Americas, Asia and the Pacific, the Middle East and Africa. Over 1,000 fund promoters have chosen Ireland to domicile and/or service their fund structures.⁴https://cdn.irishfunds.ie/x/4b95011afa/2023-05-6709-irish-funds-why-ireland-2023-euro-web.pdf?_gl=1*jdvvqu*_ga*MTkwMzg5MTEyMi4xNzA1MzQ2MzM4*_ga_M4G8XK9Q1L*MTcwNTM0NjMzOC4xLjEuMTcwNTM0NjM1Mi40Ni4wLjA.

Housing traditional ‘long only’ to more bespoke alternative strategies, and everything in between, Ireland offers innovative product solutions to cater to a broad range of investment strategies. Ireland continues to prove popular as a domicile in the alternatives space being at the forefront of product innovation to cater for the more complex needs of this sector. While the Irish Collective Asset-Management Vehicle and Section 110 company remain the most popular Irish regulated and unregulated structure, respectively, the broader product suite has continued to develop and expand to meet the changing needs of the industry.

As well as access to the EU market, which provides a number of regulatory and tax benefits, fund managers can rely on a diverse product suite which can be serviced locally by an experienced ‘ecosystem’ of high-quality service providers and caters for a wide range of investment strategies. In addition, the Irish tax regime has been, and continues to be, one of the key growth drivers of the funds industry in Ireland. This is further supported by Ireland’s extensive and expanding double tax treaty network with over 70 treaty partners.

Recent trends and developments

Globally, the alternative fund industry continues to evolve fuelled by changing investor preferences, an increasing focus on sustainability, regulatory requirements, technological disruption and volatility in international markets.

In response to some of these macroeconomic trends, the Irish alternatives sector has continued to evolve to meet the needs of this ever-changing market. The growth in the Irish alternatives sector reflects broader global market trends, where there has been a noted increase in allocations to private markets. Strategies housed within Irish alternative funds span hedge funds, private equity, private debt, infrastructure, real estate as well as a significant number of aircraft leasing and shipping funds.

Some recent noteworthy developments from an Irish perspective include:

Product Update

Investment Limited Partnership Reform

Amendments to the legal and regulatory framework governing the Irish regulated partnership offering has significantly enhanced Ireland’s offering for asset managers seeking to set up an onshore private fund.

As an AIFMD-compliant and EU domiciled common law partnership, the Investment Limited Partnership (ILP) has become Ireland’s flagship partnership vehicle for use as an investment fund, typically selected by managers availing of closed-ended strategies in real estate, private equity, credit, infrastructure, sustainable finance and related asset classes. It is clear that investor demand for exposure to these asset classes continues to grow, particularly in the institutional space, where the illiquidity premium and long-term nature of the investment strategy are in many instances aligned to the investment objectives of institutional investors such as pension funds, sovereign wealth funds and insurance companies. Transparent structures can lend themselves well to these initiatives in that they facilitate direct exposure to the underlying asset class for an investor.

Furthermore, the ESG agenda more broadly is requiring a departure from the status quo in terms of structuring new products. Increasingly, investors expect asset managers to incorporate ESG principles into their investment strategies and this is having an impact on the product and domicile which is chosen to house these strategies. The updates to the ILP regime significantly enhance Ireland’s product suite for private fund managers at a time when an onshore regulated jurisdiction is of increased importance.

The increasing allocations towards private assets, coupled with the ESG agenda, has fuelled growth in Irish partnership structures, in both regulated (the ILP) and unregulated form (commonly referred to as a 1907 Limited partnership).

Reform to the Irish Holding Company

Confirmation from the Department of Finance that a territorial tax regime will be introduced for Ireland from 2025 is a very welcome development for the Irish asset management industry. The introduction of a territorial tax system will reform the Irish holding company structure which will further enhance the Irish product suite.

European Long-Term Investment Funds (ELTIF)

Last year, in response to limited growth in the ELTIF market, the European Union adopted a revised regulatory framework for ELTIFs (commonly referred to as “ELTIF 2.0”).

ELTIF 2.0 is proving to be an attractive product to fund promoters and aligns with the EU’s policy priorities of channelling capital towards European long-term investments in the real economy. Furthermore, in the context of the ESG agenda, the long term nature of ELTIFs compliments the return profile of large scale infrastructure products which will be required for the transition to a greener economy. With global climate action plans such as the EU climate action plan, spanning over a number of years, so must investments, making the ELTIF a suitable investment vehicle.

Additionally, the ELTIF will allow for a new way for retail investors to invest in private and long-term investments, which was not feasible for them under existing fund structures in Ireland. This is timely, in the context of the broader “Retailisation” trend within the alternatives sector, the structure is designed to facilitate retail investment into private assets.

The Central Bank of Ireland (CBI) is in the process of updating its rules and authorisation process for establishing an ELTIF in Ireland. The new framework will enable Ireland to compete with other EU jurisdictions such as Luxembourg, France and Italy, in becoming a popular location to establish an ELTIF further enhancing the product suite. Under the current proposal, the CBI has indicated that ELTIF will be authorised under the existing Irish investment fund legislative framework.⁵CP155 – Consultation paper on ELTIF chapter in the AIF Rulebook Accordingly, it is expected that the appropriate tax regime will align with that which currently applies to the existing suite of regulated products, ensuring an Irish ELTIF can be established as a tax efficient asset pooling structure.

Ireland as a hub for Sustainable Finance

The area of sustainable finance continues to evolve to meet the needs and expectations of a broad stakeholder group, including investors, policy makers, regulators, society more generally in addition to asset managers. Private markets exist to mobilise private finance for long-term infrastructure projects linked to climate and are expected to be a funding mechanism for such investments.

Ireland has positioned itself as a world leader in sustainable finance developing the talent, knowledge and product suite needed to harness this market opportunity. Furthermore, its reputation as an onshore EU domicile with a robust regulatory and tax framework has ensured the sector is well positioned to capitalise on the broader ESG opportunity.

Funds Sector 2030: Sectoral Review

Recognising the important role that asset management and fund servicing have played in the success of the international financial services industry in Ireland over many years, the Irish Minister for Finance, Michael McGrath T.D. announced a review of the funds sector on 6 April 2023.⁶Funds Sector 2030: A Framework for Open, Resilient & Developing Markets The stated aim of the review is to ensure the sector remains resilient, future-proofed and a continued example of international best-practice. Key objectives include developing a framework within which Ireland can maintain its leading position in fund management and fund servicing and ensuring that the sector continues to support economic activity both at the regional and national level in Ireland.

This is a positive development and demonstrates the commitment to the sector from a government policy perspective. The review is seeking to ensure that Ireland will continue to be at the forefront of international asset management and fund servicing into the future.

Technology and Innovation

Technology is also disrupting the asset management industry including the way investments are traded, securities are held and contracts are settled. This change challenges traditional infrastructure and forces industry players to adapt to technology to facilitate alternative processes, while regulators must simultaneously navigate innovation and protection. As an industry, appropriate response is needed.

The Irish asset management industry has recognised that technology is key to responding effectively to increasing regulatory, reporting and efficiency demands of the sector. A vibrant and expanding indigenous sector of FinTech and RegTech services continues to develop supporting the Irish asset management ecosystem, harnessing Ireland’s position as a leading domicile in fund services as well as a key location of choice for the largest global technology companies.

Looking to the future

Ireland has long been renowned as a centre of excellence for a range of investment fund types and the location of choice for a variety of international asset management firms in which to establish operations and to domicile funds. Shifting investor demands, increased onshoring, regulation, the ESG agenda and the outcome of the Funds Sector 2030 Review, will all continue to shape the Irish alternative funds industry. The enhancements to the ILP product, reform of the holding company as well as the proposed amendments to the Irish ELTIF framework, significantly enhance Ireland’s product suite for private fund managers at a time when tailored investment structuring is of paramount importance. A “one size fits all” approach to structuring investment in private assets will be unsustainable into the future and consequently, the availability of a full product suite to adopt a tailored approach is crucial.

From an ESG perspective, Ireland is viewed as a global centre of excellence for sustainable finance and continues to be a key enabler in mobilising private finance (including blended finance solutions) to fund the transition to net zero and sustainability more broadly. The broader asset management infrastructure and ecosystem will need to have the flexibility to service these tailored solutions in an efficient and “tech-enabled” manner and Ireland’s flourishing Fintech sector will prove important in this regard.

Continual evolution is needed to meet the needs of an ever-changing market and the developments above support Ireland’s commitment to doing so.