The Irish Government, in its 2018 IFS Action Plan, identified several initiatives for the further development of Ireland’s international financial services sector. Amongst the opportunities for growth in the financial services sector, the Action Plan identifies proposals to promote the establishment of private equity funds and venture capital fund vehicles in Ireland – these proposals included a plan to update and modernise the existing partnership legislation to ensure that Ireland has a best in class partnership structure.
The result was that on 20 June 2019, the Irish Government published the Investment Limited Partnerships (Amendment) Bill 2019, which proposes to reform and modernise Irish legislation regulating Investment Limited Partnerships. It is anticipated that the bill will have passed all stages of the legislative process and will be enacted before the end of this year – see the current stage of the bill on oireachtas.ie, here.
Ray Kelly, Head of Asset Management at EisnerAmper Ireland, discusses with Ray O’Neill, CEO at Fincovi, a specialist renewable energy financial back-office, why this legislation is timely in the context of Ireland attracting Fund Managers focussed on the Renewable Energy sector.
Why is this development of interest to Fund Managers investing in Renewable Energy assets?
The revision of the Irish Investment Limited Partnership (ILP) laws, as outlined in the draft bill published in June 2019, has already caught the attention of fund managers who are serious about growing their funds, attracting new investors and increasing yield.
The scale of the renewable energy market opportunity in both Ireland and Europe is evident from the numbers below:
In taking advantage of these investment opportunities, we expect Ireland to be an attractive option for fund managers to domicile their funds.
What changes does the bill introduce that will be attractive to Fund Managers who have not had previous experience of utilising Ireland to domicile their funds? Or perhaps Fund Managers who may have previously considered Ireland but decided to domicile in Luxembourg?
The bill will introduce several changes to the current legislation of particular significance to renewable energy investors:
The bill allows ILP’s to establish an umbrella fund, with segregated liability between the sub-funds. This provides a lot of flexibility for investors to gain access to different asset classes at different stages of their development cycle while putting a comforting ring-fence on the liability of each sub-fund.
The same bill gives more certainty and clarity around the activities a limited partner can and cannot undertake, without increasing liabilities.
LPs can participate in advisory committees and can vote on changes to the partnership agreement, now with only a simple majority, and without losing their limited liability status.
ILPs operating in a non-English speaking jurisdiction can register a “dual foreign name” to facilitate translation requirements.
It is likely that partners will not be required to contribute to the capital of the partnership going forward, save for the prescribed terms of the partnership agreement.
Apart from the changes to the ILP what other attractions does Ireland hold for Private Equity (PE) Managers investing in renewable energy assets?
Ireland is already an attractive place to establish an investment platform. Its legal, regulatory and tax environment could be attractive to any renewable energy fund. Irish corporation tax allows for neutral treatment, provided certain conditions are met. It also has a wide and expanding tax treaty network, second to none, with an established world-beating aviation section already optimising the tax regime and local expertise.
With over 60% of global leased aircraft being leased out of Ireland, the government and financial services industry is now ramping up its green finance offer to mirror its longstanding success in aviation.
What are some other key considerations for success that Renewable Energy Fund Managers should be aware of?
Renewable energy fund managers are subject to increasing regulatory requirements, rising costs and pressures to reduce fees. Jurisdictional tax efficiencies, for example moving your fund to Ireland, is certainly one way to compete. But success will also hinge on the effectiveness of the manager’s infrastructure, in-house operations and outsourcing strategies. Trending in the industry – and Ireland is no different – is to outsource financial management, reporting and portfolio reviews. As well as securing significant savings, fund managers that embrace administrative and governance outsourcing reduce the risks associated with old “organically” developed in-house processes. No more Excel files everywhere!
Fund managers need to show investors how they can systematically cut costs, enhance governance and speed up the data cycle, so that they can achieve sustainable returns. Anything that can help add depth to this element of the investor pitch is worth more than consideration. It’s an imperative and Ireland is well placed to assist in this regard.
Finally, do you expect Ireland to achieve similar success in the PE arena as they have in the hedge fund and aviation sectors?
The Irish Government has an ambition to attract 5% of the $3.3 tn global PE market, with a focus on green finance. Indeed, it has been suggested that jurisdictions such as Luxembourg anticipate nervously a steady flow of up to 25% of their PE funds to relocate to Ireland over the next 24 months. Building on our existing expertise in serving the Hedge Fund and Aviation sectors we expect these targets to be achievable.
At EisnerAmper Ireland, we design and deliver business and compliance solutions for Asset Managers, Private Equity Funds & Investment Firms – providing audit, internal audit, tax, risk & regulatory, outsourcing and advisory services. If you have any queries or if we can assist you in any way, please do not hesitate to contact Ray Kelly.
Fincovi’s centre of excellence, based in Ireland, does what every investor wants from an asset/fund manager. They drive down costs, standarise the governance process and identify ways in which the yield on each asset can be increased. If you have any queries in this regard, please contact Ray O’Neill.
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