At a time when Ireland continues to struggle with its economy and general banking sector, the country’s fund services industry has stood out in its resilience to the turmoil affecting the jurisdiction.

For over 20 years Ireland has been a leading regulated domicile for internationally distributed investment funds, dealing with a wide range of fund types from traditional long-only to more complex structures. Ireland boasts an open, transparent and well-regulated investment environment with a strong emphasis on investor protection. It offers an efficient tax structure.

With over 3,400 professionals employed exclusively in the servicing of alternative investments, the Irish funds industry has developed as a centre of excellence. Irish expertise in alternative investments spans a range of services including fund administration, transfer agency, custody, legal, tax and audit services, stock exchange listing, compliance and consultancy services.

Ireland services over 40% of all hedge fund assets globally, with €183 billion of assets in Irish-domiciled non-Ucits funds, €133 billion of which is in qualifying investor funds (QIFs). Ireland says it is alternative investment fund managers (AIFM) directive ready with the Irish regulatory regime already aligned with many of the requirements of the new EU law. Irish-regulated alternative investment funds, for example, are already required to have an independent depositary and they are administered and valued by entities authorised and supervised by the Central Bank of Ireland.

Nevertheless, Irish service providers are finding they have to adapt to a changing investment environment to maintain their premier position. Work is no longer concentrated in Dublin and a number of fund administrators have offices in other cities.

The regulatory environment in which service providers are working is also changing. In April 2009 the government announced the Financial Regulator and the Central Bank of Ireland would be integrated into one institution, the Central Bank of Ireland Commission. Legislation to implement the changes has yet to be enacted, although the government has agreed it will go ahead. The regulator already sits within the bank.

The commission will be chaired by the governor of the Central Bank and will be responsible for both the supervision of individual companies and the stability of the financial system. Instead of the current chief executive of the regulator, there will be a head of financial supervision. The regulator has begun the changeover process, appointing staff to handle risk, enforcement, markets supervision and policy.

Matthew Elderfield took up his position as the regulator’s chief executive at the beginning of 2010. Elderfield’s appointment has been largely welcomed by the funds services industry. He has been proactive and supportive of the sector so far, despite most of the regulator’s attention being diverted during the past few months to the banks and its own internal organisation.

Like other EU fund jurisdictions, Ireland is in the process of preparing for the introduction of the fourth iteration of the Ucits directive in July 2011. Ucits IV is expected to be an opportunity for Ireland as it makes it easier for funds to be marketed across the EU and simplifies the way information is provided to investors.

The Irish government supports the industry. Measures included in the finance bill unveiled in February 2010 included clarity over the tax treatment of Ucits IV funds managed from Ireland and domiciled elsewhere as well as an exemption for Irish-regulated funds from the collection of non-resident tax declarations for investors outside Ireland. The financial regulator regulates managers present in Ireland and requires that the management company has two Irish directors.

Although regulatory requirements and taxation levels are similar to those imposed on hedge fund managers in other jurisdictions, the majority of European managers seem content to stay in London where they have better access to a wider range of investors.

Fund managers looking to set up a hedge fund in Ireland have traditionally chosen the QIF as a structure. QIFs were first introduced in 1996. They have more flexibility than Ucits-compliant vehicles. There are no restrictions on the strategies that can be run in a QIF and no leverage limits.

Those wanting to invest in a QIF must meet certain criteria. Institutions must be worth or be able to invest at least €25 million while individuals must have a minimum net worth of €1.25 million. The minimum investment for a QIF is €250,000.

QIFs accounted for €117.1 billion of Irish-domiciled AUM in February 2010, the highest AUM ever recorded for QIFs.

Hedge funds domiciled in Ireland, as well as those domiciled offshore, can be listed on the Irish Stock Exchange. Legislation designed to streamline the process of redomiciling a fund to Ireland was introduced in 2009 with the passage of the Companies (Miscellaneous Provisions) Act 2009.

Among the act’s provisions was a process for redomiciliation that brings Ireland into line with other jurisdictions and has already attracted a high level of interest.

The process is said to be simple, straightforward and timely. Irish legislation will enable migrating funds to move all their assets, investors and track record to Ireland. The Irish fund will be the same company as it was in its original jurisdiction.

The redomiciling exercise consists of three major steps. The fund must convene a shareholders’ meeting to approve the process and the investment management company has to be approved by the Irish Financial Regulator to act as the promoter and manager of the fund.

The fund manager has to decide whether the Irish fund will be established as a Ucits-compliant vehicle or as an Irish QIF.

Documentation must then be put in order, including ensuring the fund’s memorandum and articles of association comply with Irish law. A declaration of solvency from a director, signed off by an auditor, is also needed. Once the fund has complied with the requirements, the regulator and the Companies Registration Office will approve it. It can then de-register from its original jurisdiction.

Funds set up in Ireland must appoint Irish-based service providers, including a custodian or prime broker, administrator, law firm and directors. Many funds are already administered from Ireland although their custodians, prime brokers, law firms and directors are unlikely to be based there.