What should we consider in relation to the Investment Manager?

A. Business model

1. Licensing
Analyse the pros and cons for either (i) establishing your own management company licensed by your home regulator in its own right; or (ii) engaging a third-party management company to provide your entity with the benefit of its licence.

2. Fees
Consider the fees in going solo versus the fees for engaging a third-party management company.

3. Market access
Consider if the chosen business model provides the required access to your target investors (eg consider if access to an EU marketing passport is required and does your choice of location affect that).

4. Other
Think about if there may be any potential impact upon your control of the business and external investor perception in both business models.

For the remainder of this article we focus mainly on the own manager set-up.

B. Operational infrastructure

1. Business location
• Consider ease of access to your chosen service providers and how easy it would be for international investors to visit you for the purposes of their own diligence.
• How important are logistics – think about ease of access to public transport/nearby airport is required. 

2. Office space
• Consider the current property market in the chosen location (this could assist in deciding whether it’s best to rent or to purchase outright).
• Bespoke office solutions such as shared working space are alternative and trendy solutions (subject to any regulatory requirements that may be in place). 

3. Other 
• Think about excellent telecommunications, IT software, data retention facilities.
• Research any potential regulatory requirements in areas such as, eg, cybersecurity, outsourcing, business continuity.
• Consider any investor requirements or expectations (eg investors may be very attracted to a robust operational structure).

C. Branding

1. Business name
• Take time to choose a name that fits with the business you’re developing.
• For assistance, consider speaking to a branding consultant.
• Check out the market for inspiration.

2. Name availability
• Check local company registers for name availability (typically this can be done in the local companies registration office (eg the Irish CRO).¹
• Take note of any potential trade mark issues.

D. Substance/Staffing

1. Regulatory requirements
• Consider any regulatory substance requirements (eg in Ireland, a management company is required to appoint ‘Designated Persons’ to carry out certain managerial functions).
• Research whether there is any local guidance to look at as a first step (eg in Ireland, the Central Bank of Ireland (the “CBI”) has issued Guidance for Fund Management Companies).²
• Check if any form of regulatory approval process is required for, eg, senior management (eg the CBI requires certain individuals (eg Directors, Designated Persons, CRO) to be ‘pre-approved’ in accordance with their ‘Fitness and Probity Regime’.³

2. Staff/resource
• An experienced team on the ground is essential.
• Consider the size of your business and discuss with your legal counsel as to any regulatory requirements on staffing/resources.
• Get recommendations from service providers, legal counsel and other relevant experienced industry professionals.
• Consider appointing well established individuals for risk, compliance, investment management.

3. Other
• Explore the possibility of secondment arrangements (eg seconding in individuals from an affiliated business or from third party service providers). This could be a solution for the infancy stage of your business but consider the short/medium and long-term costs involved together with any investor perception of such arrangements.

E. Governance

1. Regulatory requirements
• Research if any local requirements or guidance is available as a starting point (eg in Ireland, a Corporate Governance Code exists for collective investment schemes and management companies).⁴
• Check if there is a form of regulatory approval process in place (eg as mentioned at point D.1).

2. Board composition
• Consider any local minimum residency requirements (eg in Ireland, you need a minimum of two (2) Irish resident directors).
• Bear in mind any potential tax implications (eg there may be a risk of having too many directors in a country that does not house the central management and control of the management company).
• Think about any investor expectations: many investors are increasingly attracted to diverse board composition (eg on the basis of gender, skills, experience).
• Research the typical directorship fee involved.
• Bear in mind potential tax implications.

3. Composition
• Consider any local regulatory requirements (eg in Ireland, an independent director is required to carry out the role of ‘Organisational Effectiveness’ to monitor the effectiveness of the arrangements of the management company on an ongoing basis).
• An independent chairperson is advisable in order to direct and challenge the board where necessary.
• Consider any investor expectations similar to the above at point E.2. 

4. Clear reporting lines
• Analyse the proposed reporting lines – think about who reports to who.
• Consider if there is potential for overlap of responsibilities leading to a conflict of interests.
• You may require separate reporting lines for risk and compliance to ensure there is no conflict. 

F. Delegation/Outsourcing/Passporting/Other

1. Delegation
• Consider if a third-party manager is required to access an EU marketing passport.
• Research any regulatory requirements that may be in place if an offshore manager is to be appointed to manage the fund (eg in Ireland, a clearance application is required from the CBI depending on whether you’re based in the EU or outside the EU – for info, see footnote⁵).

2. Outsourcing
• Research any local requirements around the outsourcing of key functions (eg in Ireland, the CBI published guidance in the form of their CBI Outsourcing Discussion Paper).⁶

3. Passporting/Marketing 
• Consider the availability of the passporting right pursuant to EU law (for EU management companies).
• Research local marketing rules. 

4. Other
• Consider potential regulatory requirements in the areas such as (i) prevention of money-laundering; (ii) cyber security; (iii) data protection and data retention requirements.

G. Ongoing requirements

1. Local requirements
Consider any ongoing local regulatory requirements, in particular filing requirements. 

2. Ongoing fees
• Regulatory: Research potential ongoing regulatory fees once authorised and whether these are annual and/or once-off (eg an Irish authorised management company is subject to both a once-off fee upon authorisation (known as the ‘Additional Supervisory Levy’)⁷ and an annual fee (known as the ‘Industry Funding Levy’).⁸
• Office space: If office space is being rented, bear in mind any potential rent review.

3. Evolving regulatory landscape
Consider the potential for changes in law/regulation that may affect the management company both at domestic and EU level (eg changes in capital requirements); with this, consider potential fees involved for, eg, for having to appoint further resources.

What about the Fund?

A. Target/Seed Investors And Investment Policy

1. Investors
Consider who your target investors are and whether they may have specific interests/expectations in terms of overall fund strategy, policy etc.

2. Investment policy
• Consider what the fund will invest in. This could dictate the type of fund you will need to set up (see below point B.1).
• Think about current trends (eg a fund that emphasises ESG (environmental, social and corporate governance) criteria – there is an increasing investor interest in this).

B. Fund formation

1. Type of fund
Consider what fund structures are available together with associated regulatory requirements. Take into account your target investors also, as this could dictate the type of fund structure you should look at setting up. For example, in Ireland the two main investment fund types are:

QIAIFs: for professional investors; there are no investment or borrowing restrictions; minimum subscription of €100,000 (or foreign currency equivalent);

UCITS: for retail investors; investment and borrowing restrictions exist.

2. Legal structure
• Research local requirements on legal forms available for your fund. Consider regulatory developments in this regard (eg in 2015, Ireland introduced legislation specific to investment funds, with the legal vehicle of choice now being the Irish collective asset management vehicle (“ICAV”) – ICAVs are structured so they can ‘check the box’ to be treated as a partnership or disregarded entity for US federal tax purposes; they are available to investment companies from other jurisdictions who wish to redomicile, register and continue in Ireland as an ICAV).
• Consider if you want the fund to be set up as: (i) standalone; (ii) umbrella; (iii) master-feeder fund.
• Take note of any investor expectations.

C. Authorisation timing

1. Regulatory requirements
Consider local regulatory timeframes that may exist for fund authorisation and take note of any personal timeframes in mind or expectations of potential seed investors. For example, in Ireland, the following timelines typically apply:

QIAIF: can be authorised typically within 24 hours (following completion of appointment of board members and service providers, CBI fitness and probity due diligence (mentioned at point D.1), all party agreement as to terms and conditions, agreements, etc, which could take 2-3 months ).

UCITS: usually 3-4 months, following an iterative process with the CBI.

2. Other
Good strong open relationships with the chosen service providers can prove extremely beneficial in ensuring a smooth authorisation process (from initial engagement, negotiation of contracts, appointment upon authorisation and thereafter).

D. Governance/Service providers/Marketing

1. Governance
• Similar considerations as per point E above may apply.
• Consider board composition and any associated regulatory requirements (eg in Ireland, a fund board must have two (2) Irish resident directors and a minimum of one independent director).

Also think about the management company board composition and how is best to ensure effective independent governance. Having a majority of independent directors could be appealing to investors.

2. Service Providers
• If you have no specific parties in mind, research the market. Test the reputation of the parties and their ability to deliver a quality service but also provide value for money.
• Consider any regulatory requirements (eg in Ireland, an Irish regulated fund is required to appoint an Irish Administrator, Depositary, Auditor and Company Secretary).
• Bear in mind point E.2 above in terms of a strong and transparent relationship with the chosen parties.

3. Marketing
• Think about where you want to market the fund and regulatory requirements around passporting or distributing the fund there.
• Consider local registration requirements and fee requirements (eg fees involved in getting fund documents translated together with local registration fees).
• Further to point D.2, query whether this service could be provided by the chosen service providers.

E. Ongoing requirements

1. Local requirements
Consider any ongoing local regulatory requirements (eg regulatory filing requirements).

2. Ongoing fees
• Service providers/Directors: Consider your agreed fee arrangements and whether these are subject to annual review/ if there is scope for negotiation.
• Regulatory: Research potential ongoing regulatory fees once authorised and whether these are annual and/or once-off (eg see point F.2 above – similar fees arrangements apply to an Irish regulated fund).

3. Evolving regulatory landscape
As per point F.3 above, bear in mind potential changes in law/regulation that may affect the fund at both a domestic and EU level; with this, consider potential fees involved for, eg having to update fund documents, together with any local regulatory filing requirements.

Next Steps

As a starting point, reach out to various parties in the industry to get more information. Take note of two final key tips:

The right legal counsel: It is important that you select the right law firm to support your business journey from inception and beyond start-up. Beyond providing sound legal guidance, the right firm should have a good overview of regulation but also market terms as they evolve, within and beyond Ireland, and have relationships with other service providers and contacts within the industry which it can leverage to your advantage. International coverage is also a significant advantage.

The right service providers: Consider seeking advice from counsel and explore their relationships/experience to date with service providers in the market. Get recommendations and second opinions.

Why choose Ireland?

A responsible, regulated, on-shore jurisdiction, Ireland is always first in class in terms of the adoption and implementation of global, regional and/or multilateral legal, regulatory and taxation related initiatives.

There are many reasons why Ireland ranks as the first choice for start-up managers; below is a snapshot:

1. Sound and robust regulatory framework
Founded on principles of openness, transparency and investor protection/robust and efficient regulation, which facilitates market and product developments while protecting investor interest/accessibility and responsiveness with the CBI.

2. Attractive tax regime
Internationally recognised as a highly efficient tax jurisdiction – Irish regulated funds are exempt from Irish tax on income and gains derived from their investments and are not subject to any Irish tax on their net asset value.

3. International reach and recognition
Committed member of the EU providing full market access/major hub for cross-border distribution.

4. Top calibre service providers
Highly experienced service providers (depositaries, administrators, auditors, legal advisers); excellent operational infrastructure (specialists in IT and telecommunications and data protection).

5. Specialist workforce
Favourable demographics and excellent educational system; plentiful supply of top quality people with young, highly skilled workforce with a positive, can-do work attitude.