Private Funds in Ireland: A Growing Hub

Non-publicly traded assets are commonly referred to as private assets, with private funds being a key vehicle for investing in these opportunities. Over the last ten years, private assets have increased dramatically. From US$9.7 trillion assets under management (AUM) in 2012 to an expected US$24.4 trillion AUM by the end of 2023, the growth in the world’s private markets more than doubled. The rise in private assets can be attributed to several factors, such as the desire for greater returns by institutional investors and the increase in the number of high-net-worth people with expanding investable cash pots. The expansion of semi-liquid funds and managers’ readiness to permit investors to transfer limited partner stakes have also made private markets more accessible to investors.

Ireland has a great chance to increase its market position in the private funds industry, which offshore funds and a few other onshore domiciles have now dominated. Improvements made to the AIF Rulebook, AIFMD Q&A, and QIAIF guidelines by the Central Bank of Ireland (the Central Bank), the release of the Investment Limited Partnerships (Amendment) Act 2020 (ILP Amendment Act), and the Department of Finance’s report “Funds Sector 2030: A Framework for Open, Resilient and Developing Markets” all demonstrate the changes occurring in the Irish market.

The development of private funds in Ireland

The preferred vehicle for managers establishing Irish-regulated funds up to this point has been the Irish Collective Asset-management Vehicle (ICAV). Introduced in 2015, the ICAV is a customized corporate funds vehicle that can be set up as an umbrella fund with distinct sub-funds or as a stand-alone fund. The ICAV is a tried-and-true tax tool that is highly effective for managers. The ICAV’s access to a wide range of international tax treaties is one of its main advantages. The ICAV has been a remarkably successful product for credit funds on the private fund’s side, especially for funds originating loans in the United States and using the advantageous Ireland-U.S. tax treaty.

As mentioned, Ireland has recently improved its offering of Irish private funds. The ILP Amendment Act, which eliminated the disadvantages of the investment limited partnership (ILP) under the previous ILP regime, was one of the most essential actions. Managers establishing private funds in Ireland now have access to the ILP, a best-in-class limited partnership form. The ILP functions as a contractual entity with no independent legal identity, supported by standard law rules, much like a Cayman and English limited partnership. Since ILPs are tax transparent, limited partners are treated tax-wise as if they had directly invested in the relevant assets, meaning there is no tax at the ILP level. The Irish government implemented a participation exemption for foreign dividends and distributions in the Finance Act 2024, which also brought about modifications from a tax standpoint. For managers looking to set up private funds in Ireland, this has further strengthened the ILP’s position as a competitive fund product.

The Central Bank recently added the ELTIF chapter of the AIF Rulebook to allow managers to create European Long-Term Investment Funds (ELTIFs) in Ireland. Irish private funds benefited greatly from the Central Bank’s implementation of Regulation 2015/760/EU, as amended, into the AIF Rulebook because the regulations were applied without embellishment. The Central Bank kindly allows ELTIFs that are established as Qualifying Investor ELTIFs or Professional Investor ELTIFs to be established within 24 hours, guaranteeing speed to market.

For managers, especially those establishing loan origination funds, the Irish ELTIF is an alluring option. One of its main advantages is that it can be promoted to both professional and retail investors throughout the EU through the AIFMD marketing passport.

Prospects for Ireland

As mentioned, the Department of Finance released the 2030 Report in October 2024 as a follow-up to the June 2023 consultation. The report was commissioned in October 2022 as part of the government’s new international financial services strategy, reaffirming the government’s goal of making Ireland a premier destination for specialized international financial services and maintaining its competitiveness on a global scale. The report is noteworthy because it highlights the value of the funds industry to Ireland, reiterates the government’s commitment to implementing the “Ireland for Finance – Financial Services Strategy” to maintain a resilient and competitive financial services sector, and offers several recommendations, including the following regarding private assets:

• The AIF Rulebook and related regulations that affect the creation of private asset funds in Ireland should be reviewed by the Central Bank and
• A set of actions should be implemented to make the ILP more appealing. This should involve reviewing the extent of the dividend withholding tax exemption and considering how the participation exemption can encourage the use of ILPs.

As previously mentioned, the Central Bank has improved its AIF Rulebook, AIFMD Q&A, and associated guidance for private funds in several beneficial ways in recent years. To improve Ireland’s private fund offering, the Central Bank has informed the industry that it is now examining and amending its AIF Rulebook per Directive 2024/927/EU (AIFMD II). It also consults with the industry on potential additional adjustments. In H1 2025, the Central Bank has stated that it plans to release a consultation on the updated AIF Rulebook.

Regarding additional prospects for Ireland, it is widely known that private credit is expanding exponentially as an asset class worldwide. As previously mentioned, credit funds have been particularly successful in Ireland, and it is anticipated that the number of credit funds with their domiciles there will keep increasing. Ireland, which now has a domestic “L-QIAIF” regime for loan-originating funds, will have an even playing field with the introduction of AIFMD II, which calls for a unified loan origination regime at the EU level. The Central Bank reaffirmed its commitment to aligning its loan origination regulations with AIFMD II. This is advantageous for managers looking to set up funds that originate loans in Ireland.

The 2030 Report also emphasizes the necessity of increasing retail investors’ involvement in the capital markets. As previously mentioned, the ELTIF’s inception was a significant advancement that allowed retail investors to participate in private investment funds. AIFs sold to retail investors are subject to Ireland’s well-established retail investor AIF (RIAIF) legislation. More recently, the Central Bank has stated that it is willing to explore more modifications to its RIAIF system.

As previously mentioned, the Finance Act 2024 established a participation exemption for overseas dividends and distributions related to taxes. ILPs benefit significantly from this, which makes them even more competitive. In addition, a reassessment of the dividend withholding exemption’s scope for ILPs is anticipated, expanding on the 2030 Report’s suggestions.

In conclusion

Private assets will undoubtedly keep increasing in value on a global scale. With substantial efforts being made at the governmental and regulatory levels to guarantee that Ireland has the tools to draw in and keep international asset managers looking to set up private asset funds, the country is well-positioned to grow its market share in private assets. Furthermore, the EU’s further harmonization of regulations (such as ELTIF 2.0 and AIFMD II) contributes to Ireland’s equality with the rest of Europe. This is highly positive and sets the foundation for Ireland’s next phase as a global funds jurisdiction, especially when combined with the country’s track record as a funds jurisdiction.

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