Changes To The Irish Qualifying Investor Fund Regime

1. Introduction

   Following a process of consultation between the Irish

   Financial Regulator and the Irish Funds Industry Association

   ("IFIA"), a number of important positive changes have

   now been introduced to the regime for the authorisation and

   regulation of Qualifying Investor Funds ("QIFs").

2. QIFs - Background

   A QIF is a non-UCITS product regulated in Ireland by the

   Financial Regulator which can be structured as an investment

   company, unit trust, investment limited partnership or common

   contractual fund (single portfolio or umbrella with segregated

   liability). QIFs have a minimum subscription requirement per

   investor of €250,000 (or equivalent) and can be sold only

   to qualifying investor individuals with a minimum net worth of

   €1.25 million (excluding principal private

   residence/contents) or institutions who own or invest on a

   discretionary basis at least €25 million (or are

   themselves owned by qualifying investors).

   The Financial Regulator will authorise a QIF for marketing

   to investors one business day after the submission of formal

   approval documents. The approval documents are submitted on a

   self-certification basis and promoters and their legal advisors

   must confirm they meet legal and regulatory criteria.

   QIFs structures give promoters the opportunity to use Irish

   regulated investment vehicles for a complete range of different

   fund types depending on the requirements of their targeted

   investors. The absence of investment and borrowing restrictions

   and immediate authorisation process means that QIFs are the

   vehicles which are most frequently used in the alternative

   investment space - hedge funds, fund of hedge funds, venture

   capital/private equity, real estate funds, etc - and are a

   mainstay of the non-UCITS Irish domiciled product offering.

   These latest changes to the regime and revised regulatory

   provisions relating to QIFs are further evidence of the ongoing

   steps being made by the Irish investment funds industry to

   provide a dynamic environment for regulated funds.

   It is anticipated that these changes, which are summarised

   below, will enhance Ireland's appeal as a domicile for a

   broad range of investment funds.

3. Summary of Changes

   Investment in Collective Investment Schemes -

   Increased Limits and Changes to Disclosure Requirements

   A QIF fund of funds is now permitted to invest up to 50% of

   its net assets in any one unregulated collective investment

   scheme. This represents an increase from the previous 40%

   limit, contained in Guidance Note 1/01. Consequently, a QIF

   which is a fund of funds may invest up to 100% in unregulated

   collective investment schemes, subject to a limit of up to 50%

   of its net assets in any one unregulated collective investment

   scheme.

   Additionally, a QIF will only be considered to be a feeder

   fund (and therefore subject to the prospectus disclosure

   requirements, outlined in Non-UCITS Notice 22, paragraphs 2 and

   3) if it has as its principal objective the investment in

   another single fund.

   The net effect of this is that a QIF will be permitted to

   invest above 50% in a regulated collective investment scheme

   and, provided investment in such scheme is not its principal

   investment objective, it will be able to do so without being

   required to (i) give details on the underlying fund in its

   prospectus; (ii) attach the underlying fund's accounts to

   the fund's accounts; (iii) disclose in the prospectus

   details of the...