Outsourced service provider and alternative investment fund manager, Alter Domus, explains why it is looking to Ireland and what makes outsourcing so attractive.
Specialised in the administration and compliance of alternative investment funds, Alter Domus has 36 global offices across 20 countries with a central operations centre in Cork, where it employs over 200 people. And the firm’s ambitions show no signs of slowing.
As part of their growth plans in Ireland, Alter Domus recently completed its acquisition of an authorised alternative investment fund manager (AIFM) from one of its longstanding clients, Beechbrook Capital. The firm has also just received approval from the Central Bank of Ireland (CBI) to launch depositary services in Ireland, specialising in private asset funds. These authorisations bolster the firm’s offering in Ireland for international investors and managers seeking to domicile alternative investment funds in Europe.
New European cross-border marketing rules make AIFM passporting rights increasingly attractive and the most effective means of marketing in Europe. Under the EU’s Alternative Investment Fund Managers Directive (AIFMD), all alternative investment funds must appoint an AIFM and a depositary. As such, outsourced AIFM has quickly become a growth market in the cross-border EU funds industry, driven largely by regulatory demand for fund managers to have more substantial local operations.
As a third-party AIFM, Alter Domus will provide portfolio management and/or risk management, compliance, and regulatory functions to alternative investment funds as an outsourced service by a specialist provider with scale.
As a licensed depositary, Alter Domus will fulfil regulated functions on behalf of some of the world’s largest alternatives investors and managers by safeguarding assets, monitoring cash flow, and overseeing fund compliance and their transactions with end-investors.
There are several reasons why Alter Domus is looking to Ireland. Firstly, says Ronan O’Donoghue, head of AIFM Ireland at the firm, Ireland is the main domicile for European funds after Luxembourg. In addition, it has a strong regulatory and legal framework, an extensive, experienced workforce and a healthy supply of well-educated graduates.
Between 2009 and 2020, Irish-domiciled alternative assets under management grew from €151bn to €751bn. Furthermore, a recent legal development is the Irish Investment Limited Partnership (ILP). O’Donoghue says: “The ILP has given the country a partnership regime comparable to partnerships in the UK, Luxembourg and the Caymans Islands. It has also increased Ireland’s standing as a very credible fund domicile, especially for UK- and US-based managers who are familiar with private equity style partnerships.”
Another driver towards third-party AIFMs is the ‘CP86’ regulatory guidance from the CBI that covers governance and expected substance requirements for AIFMs, including minimum levels of full-time employees with appropriate skills and experience located in Ireland. The CBI expects full compliance with CP86 by the end of this year. O’Donoghue says this gives impetus for more managers to work with third-party AIFMs instead of dealing with the ever-increasing levels of regulatory requirements and increased cost of an in-house AIFM.
Alter Domus believes the European-wide review and guidance on governance and substance requirements for AIFMs will lead to further consolidation, increasing third-party AIFM use.
“Management company business will become more consolidated,” says O’Donoghue. “Standards are being monitored, while the governance and number of full-time employees that managers are expected to have has increased. Many managers have set up their own management companies, but as the burden of running these increases, it may be more attractive to work with third-party managers like ourselves.”
Head of depositary services Benoit Dewar says Alter Domus’s approval by the CBI to launch a specialised depositary services business is part of its overall strategy. “We want to provide integrated services to our clients and be able to serve them in the most value-added ways possible.” he explains. “In Ireland, the conditions are perfect to welcome real asset AIFs, and we are extremely happy to have received authorisation to not only provide depositary services, but to be one of the first non-bank depositaries in the country.”
Dewar adds: “Our aim is to serve asset managers with funds in Ireland, whether by providing them with an AIFM, general fund services, the depositary function, SPV services, or all of the above. It’s all about serving as a central point of contact for all these activities. And appointing a depositary with the right data flows in place with the AIFM and fund services team is the best way to get an efficient set-up, where all parties can focus on their core business.”
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