Growth expected in Irish credit and lending funds

Ireland has become, since the 1980s, a major hub for investment funds, home to a significant presence of globally-known asset management firms. The sector’s growth has been continual: according to IDA statistics, Ireland’s financial services sector has seen a 25 per cent increase in jobs since 2015, reflecting its importance as a strategic hub for the industry. Assets in Irish investment funds hit an all-time high of €5 trillion in December 2024 following a remarkable 22 per cent increase in the last 12 months.

Oisin McClenaghan, partner at international law firm Ogier, which works with clients in financial services, said the clear expectation is for the sector to continue to expand. Part of the Irish growth story is expected to come from enhancements and developments relating to Irish domiciled private credit and directly lending funds.

“Ireland is uniquely positioned to capture the next wave of growth in the financial services sector,” he said.

McClenaghan, who leads the investment funds team at Ogier in Ireland, outlined the assistance typically required by clients to get funds up and running.

“We co-ordinate the fund launch process with our investment manager clients, advising on the regulatory landscape, dealing with the Central Bank, drafting the fund’s prospectus or other offering documents, assisting with the negotiation of investment management, administration and depositary agreements, dealing with formal incorporation, board meetings, board approvals, and we also have a structured finance team that can help to create tax efficient SPVs [special purpose vehicles],” he said.

Ireland’s reputation as a stable regulatory environment in a complex and shifting world is one of the many factors contributing to Ireland’s success, McClenaghan said.

Today, some €5 trillion of assets under management (AUM) are held in funds based in Ireland, trailing only Luxembourg’s €6.5 trillion and an estimated €8 trillion in the Cayman Islands.

“Why Ireland? Ireland is the second-largest international fund domicile in Europe, the third-largest in the world and, many experts agree, is on track to become the biggest in Europe by 2030 – though that is accelerating, in fact, so it may happen sooner,” said McClenaghan.

Thus, the economic importance of funds to Ireland should not be underestimated. “600 asset managers have Irish-domiciled funds. There are over 20,000 people directly employed in the industry and there are close to nearly 10,000 [individual] Irish-domiciled investment funds. There is a further substantial cohort of non-Irish funds serviced out of Ireland,” he said.

While global economic uncertainties and evolving international regulations could present challenges to projected growth, factors indicating potential growth include new developments for investment vehicles, such as the European Long-Term Investment Fund (ELTIF) which were substantially enhanced following the implementation of a new regime in 2024, according to Jennifer Dobbyn, partner in Ogier’s investment funds team.

ELTIFs are a type of investment fund within the EU, designed to channel capital into long-term projects in the real economy through investment in infrastructure, smaller cap and unlisted companies, and private credit. They were first introduced in 2015, but updated under revised regulation, otherwise known as ELTIF 2.0, which entered into force on January 10, 2024.

“ELTIFS are not only available for institutional investors but can also grant retail investors access to alternative assets, including lending strategies, under a pan-European marketing passport,” she said.

On the domestic front, Irish Collective Asset-management Vehicles (ICAVs), corporate structures specifically designed for investment funds in Ireland, have also proved very popular with investment managers, particularly those availing of favourable tax treatment under the US/Ireland double tax treaty.

“In recent years we’ve seen huge popularity in the ICAV, one of the attractive features for asset managers being speed to market and the ability to avail of the Central Bank’s 24-hour approval process for ICAVs structured as Qualifying Investor Alternative Investment Funds (QIAIF),” said Dobbyn.

As the European finance landscape, already well-integrated, continues to come together, Ireland’s strategic position as a gateway to Europe for global investment managers is further solidified. The country’s access to the EU single market and the highly evolved ecosystem of fund service providers now operating throughout Ireland are recognised as key advantages by financial services leaders.

Ireland is the second-largest international fund domicile in Europe, and is on track to become the biggest in Europe

“Sometimes clients will have a very clear understanding of what type of fund structure they need, and we can get it up and running very rapidly,” McClenaghan said.

“You can set up a fund in Ireland and then sell it across Europe nearly immediately. There are two regimes for that, UCITS [Undertakings for Collective Investment in Transferable Securities] on the retail side and AIFs [Alternative Investment Funds] under the AIFMD [Alternative Investment Fund Managers Directive] regime for professional investments. Irish UCITS and AIFs are sold all over the world, and the UCITS brand in particular has become globally recognised.

“We continue to see significant strong growth in the use of fund structures to originate lending as an alternative to more traditional bank lending. Funds have emerged as significant players in the lending marketplace over the last 10 years. Globally, this sector is expected to grow to $2.8 trillion by 2028.

“Growth in Irish credit and lending funds is expected through upcoming changes to the AIFMD as well as new avenues to use fund structures to lend under ELTIF 2.0.

“The AIFMD changes in particular are very positive from an Irish perspective, significantly enhancing and simplifying the regulatory landscape direct lending funds are subject to,” he said.

“Changes to the ELTIF regime have also opened significant new routes to delivering credit strategies for investment managers.”