Structuring Options Independence Commitment Expertise Introduction - - PowerPoint PPT Presentation

Independence – Commitment – Expertise

Irish Domiciled Funds Structuring Options

Mike Kirby Managing Principal, KB Associates

Introduction

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3 646 748 964 1,055 1,227 1,344 1,664 1,899 2,085 2,097 500 1000 1500 2000 2500 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

EUR Billion Year

Irish Domiciled Funds Total Net Assets

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Structuring Options Overview

Barry Harrington Director of Consulting Services, KB Associates

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Overview

• Key fund structuring considerations
• Fund structuring variables;
• Domicile, Regulatory status, Legal form, Liquidity, Share class

design

• Principle fund structuring options
• Relative merits of the structuring options
• Pension fund opportunities - Why Common Contractual Funds are

gaining traction

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Key Structuring Objectives

• Support investment strategy
• Support distribution strategy
• Achieve operational efficiencies

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Fund Structuring Variables - Domicile

• Key Jurisdictions
• Cayman
• Ireland
• Luxembourg
• Requirements of institutional versus retail investors
• Manager considerations
• US/UK Managers have a traditional preference for Ireland as a European domicile

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Fund Structuring Variables - Regulatory Status

• UCITS
• AIFMD
• Non-UCITS/Non-AIFMD

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Fund Structuring Variables – Legal Form

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Irish Fund Structure Unit Trust/CCF Management Company Proprietary External/Third Party Corporate Vehicle (ICAV/PLC) Self-Managed (SMIC) Management Company Proprietary External/Third Party Platform

Ireland’s Bespoke Corporate Fund Structure – The ICAV

• Ability to “Check the box” for US tax purposes
• Avoids the need for compliance with Irish company law

requirements

• May produce sub-fund by sub-fund financial statements
• Ease of change to constitutional documents - investor approval

not required

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Fund Structuring Variables - Liquidity Terms

• UCITS
• Daily
• Weekly
• Fortnightly
• AIFMD
• A function of the asset class
• Daily/Weekly/Monthly/Semi-Annual/Annual (limited liquidity)

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Fund Structuring Variables - Share Class

• Requirements differ between Retail and Institutional
• Differentiating factors
• Fees
• Currency
• Hedged v unhedged
• Accumulating v distributing
• Minimum investment amount

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Principle Fund Structuring Options

• External/third party management company
• Proprietary management company
• Self-managed structure
• Platform

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Relative Merits of the Structuring Options

External/third party management company advantages

• Ease and speed of establishment
• Elements of risk transferred to an outside party
• No capital required

Proprietary management company advantages

• Clear demonstration of control
• Clear demonstration of substance

Self-managed funds advantages

• Cost efficient
• No external control issues

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Pension fund opportunities- Why Common Contractual Funds are gaining traction

• Irish regulated asset pooling fund structure available since 2003
• Unincorporated body established under a deed where investors are “co-owners”
• f underlying assets which are held pro rata with their investment into the CCF,

facilitating the application of tax treaty benefits at the investor level

• The UK equivalent is the TTF and the Luxembourg equivalent is the FCP
• Benefits from Ireland’s competitive tax regime providing certainty, stability and

transparency

• Can operate under AIFMD or UCITS
• May not be sold to natural persons

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Existing Separately Managed Accounts/Funds

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UK Pension

US Equities US Equities

Dutch Pension

US Equities

South African Pension Operationally Inefficient: Multiple Structures Multiple Manager Appointments Multiple Service Providers (Admin, Custody, Tax & Audit)

CCF Introduction

Tax Efficient: UK/US Preferential WHT Rate Dutch/US Preferential WHT Rate South African/US Preferential WHT Rate

Traditional Pooling

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UK Pension

US Equities

Dutch Pension South African Pension Tax Inefficient: US WHT Rate @ 30% Operationally Efficient: Single Structure Irish/Lux Investment Fund Single Manager Appointment Single Set of Service Providers (Admin, Custody, Tax & Audit

CCF Introduction

Solution – The CCF

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UK Pension

US Equities

Dutch Pension South African Pension Operationally Efficient: Single Structure Single Manager Appointment Single Set of Service Providers (Admin, Custody, Tax & Audit) CCF

Share Class 1 Share Class 2 Share Class 3

CCF Introduction

Tax Efficient: UK/US Preferential WHT Rate Dutch Preferential WHT Rate South African/US Preferential WHT Rate

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Conclusions

Key Considerations when establishing a fund product:

• Appropriate legal and regulatory framework
• Investor requirements and investment strategy
• Financial and tax factors
• Tax efficiencies and cost of doing business
• Market and Distribution factors
• Reputation, experience and efficiency of the fund domicile

Platform

• r

Open Architecture ManCo

Moderator: Mike Kirby, Managing Principal, KB Associates Speakers: Richard Grant, Chief Operating Officer, Veritas Asset Management Tom Berrigan, Managing Director, Davy Investment Fund Services Peter Northcott, Executive Director, KB Associates UK

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Closing Remarks

Mike Kirby, Managing Principal, KB Associates

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www.kbassociates.ie

info@kbassociates.ie

KB Associates

Offshore Fund Consulting

5 George’s Dock IFSC Dublin 1 Ireland Tel: +353 1 668 7684 Centennial Towers, West Bay, PO Box 31249, Grand Cayman, KY11205 Cayman Islands Tel: +1 345 525 4224 42 Brook Street London W1K 5DB United Kingdom Tel: +44 203 170 8814 23