UCITS and AIF Share Classes


  1. Irish investment funds are permitted to establish separate classes of shares within an investment fund (or sub-fund of an umbrella investment fund) provided that the structures involved do not result in any prejudice to investors in one class vis-á-vis investors in another. The two fundamental principles, which underpin the Central Bank’s approach to the use of one or more classes within a single investment fund, are set out in Regulation 26 of the Central Bank UCITS Regulations and in the “General Rules” section of the Retail Investor AIF (section 1.ix of Part I) and Qualifying Investor AIF (section 1.v of Part I) chapters of the AIF Rulebook (together, the "Share Class Rules").
  2. Share classes may be established which may be differentiated on the basis of distribution policies, charging structure and currency hedging. In the case of Retail Investor AIFs and Qualifying Investor AIFs, ("AIFs"), share classes may also be established on the basis of interest rate hedging, different levels of participation in the performance of the underlying portfolio or different levels of capital protection.

    In the case of UCITS all features of the share class should be pre-determined and detailed in the prospectus before share classes are set up.

Hedging Against Exchange Rate Movements at Class Level

  1. The Central Bank permits currency hedging at share class level whereby the costs/benefits of the hedge transaction is allocated to the share class, rather than to the pool of assets as a whole. The Share Class Rules set out the requirements of the Central Bank in relation to the creation of hedged share classes.
  2. In the case of UCITS, the responsible person should have regard to the following:
    • If the introduction of the share class gives rise to administrative costs, those costs should only be borne by the relevant share class.
    • The notional of the derivative transaction should not lead to a payment or delivery obligation with a value exceeding that of the share class.
    • The need to ensure that counterparty exposure is assessed in line with limits laid down in Regulation 68 of the UCITS Regulations at the level of the share class.
    • The need to have, readily available, a up-to-date list of all hedged share classes within the UCITS.
  3. Regulation 26(3) of the Central Bank UCITS Regulations and the Retail Investor AIF chapter (paragraph 4 of section 3.xix of Part I) sets out requirements regarding inter alia over-hedged positions. Over-hedged positions should be included in calculations of global exposure. In the case of UCITS, the responsible person should also ensure that under-hedged positions do not fall short of 95% of the portion of the NAV of the share class which is to be hedged and keep any under-hedged position under review to ensure it is not carried forward from month to month.
  4. In the case of UCITS, the responsible person should implement stress tests to quantify the impact of losses on all classes within the UCITS that could arise due to losses relating to share class-specific assets that exceed the value of the respective share class. The results of the stress test should be made available to the Central Bank on request.

Interest Rate Hedging

  1. In the case of AIFs, the Central Bank permits interest rate hedging at share class level where the benefits and costs of such hedging may be accrued and attributed solely to investors in a hedged share class. Such arrangements should be effected in accordance with the principles set out in the AIF Rulebook.

Different Levels of Participation or Capital Protection

  1. AIFs should only use FDIs at share class level to provide a different level of participation in the performance of an underlying portfolio or different levels of capital protection where:
    1. the FDI for each share class is based on the same underlying portfolio or index;
    2. the transactions do not result in a leveraged return per share class, i.e. the participation rate does not exceed 100% of the relevant share class’ performance of the underlying portfolio;
    3. the AIF holds a legal opinion that the OTC counterparty’s recourse to the AIF is limited to the relevant share class’ participation in the AIF’s assets; and
    4. the board of the investment company/management company submits confirmation to the Central Bank that they have reviewed and are satisfied that the arrangements will, as a result of the agreement between the AIF and the counterparty, not result in any prejudice for unitholders in one class over another and that there will be no cross liability between share classes.

Constitutional Documents

  1. An investment fund should disclose in its constitutional document where it intends to create hedged and/or unhedged share classes.
  2. Where it is proposed or envisaged that hedged share classes will be created the constitutional documents should, in respect of the hedging transactions at class level, contain valuation and allocation provisions and provisions for the charging of the resultant costs and gains/losses to the relevant share class.


  1. In order to provide hedging at class level, the valuation systems operated by the management company, investment company or administration company should be capable of processing and identifying the relevant hedge transactions at share class level. Systems should also be in place to enable a review of the hedge to be undertaken in the light of ongoing flows into and out of the share class.

Issued: 5 October 2015
Latest revision: 28 June 2017