UCITS Acceptable Investment in other Investment Funds  

Investment in AIFs - Acceptable Types of AIFs 

1. Subject to completion of the specific application procedures detailed below, the Central Bank will permit investment by UCITS in the following categories of AIFs:

(a) schemes established in Guernsey and authorised as Class A Schemes;

(b) schemes established in Jersey as Recognised Funds;

(c) schemes established in the Isle of Man as Authorised Schemes;

(d) Retail Investor AIFs authorised by the Central Bank provided such investment funds comply in all material respects with the provisions of the UCITS Regulations and the Central Bank UCITS Regulations;

(e)  AIFs authorised in a Member State of the EEA, the US, Jersey, Guernsey or the Isle of Man and which comply, in all material respects, with the provisions of the UCITS Regulations and the Central Bank UCITS Regulations.

  • The consideration of “all material respects” should include, inter alia, consideration of the following: the existence of an independent depositary with similar duties and responsibilities in relation to both safekeeping and supervision;
  • requirements for the spreading of investment risk including concentration limits ownership restrictions, leverage and borrowing restrictions, etc.;
  • availability of pricing information and reporting requirements;
  • redemption facilities and frequency;
  • restrictions in relation to dealings by related parties

2. Other jurisdictions and types of AIF may be considered by the Central Bank on the basis of submissions made for that purpose.  In assessing any submissions made, the Central Bank will have regard to:

  • memoranda of understanding (bilateral or multilateral), membership of an international organisation of regulators, or other co-operative arrangements (such as an exchange of letters) to ensure satisfactory cooperation between the Central Bank and the competent authority of the AIF;
  • whether the management company of the target AIF, its rules and its choice of depositary have been approved by its regulator;
  • whether the AIF is authorised in an OECD jurisdiction. 

The Following Factors Can be Used by The Central Bank to Guide a Decision on Equivalence:

  • rules guaranteeing the autonomy of the management of the AIF and management in the exclusive interest of the unit holders;
  • the existence of an independent depositary with similar duties and responsibilities in relation to both safekeeping and supervision. Where an independent depositary is not a requirement of local law as regards the AIF, robust governance structures may provide a suitable alternative;
  • availability of pricing information and reporting requirements;
  • redemption facilities and frequency;
  • restrictions in relation to dealings by related parties;
  • the extent of asset segregation; and
  • the local requirements for borrowing, lending and uncovered sales of transferable securities and money market instruments regarding the portfolio of the AIF.  

Such submissions would need to be detailed and comprehensive and should contain supporting documentation from the jurisdiction in question.   In view of the detailed review which such a proposal would require, the complete submission would need to be provided to the Central Bank well in advance of an authorisation application. 
 

Specific Application Procedures

3. The responsible person should confirm in writing to the Central Bank that investments in AIFs will fall under the categories outlined in this guidance. It is not necessary to refer to this confirmation in the prospectus.

4. In the case of UCITS which may invest more than 20% of net assets in other investment funds the prospectus should list:

  • the jurisdictions in which prospective investment funds investments will be domiciled;
  • the types of investment funds in which the UCITS will invest, including a description of their regulatory status
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Issued:  5 October 2015

Latest revision: 5 October 2015