The Irish Funds Industry Association welcomed the Central Bank of Ireland s proposals to establish a regulated loan fund framework in Ireland.
This will be the first regulatory regime in the EU for loan funds and will operate under the EU s Alternative Investment Fund Manager s Directive (AIFMD). Managers should be available to the AIFMD s Europe-wide marketing passport for professional investors when selling the Irish loan fund structure in Europe. The new fund will be of particular benefit to large SMEs and intermediate sized companies which are too small to access the corporate bond market. Loan origination by investment funds has grown in popularity in response to a funding gap created by restrictions on access to bank credit in the aftermath of the financial crisis. It is estimated that the European private debt investment market includes direct lending funds is under management of US $33 billion. The new loan origination fund product will be structured as a Qualifying Investor Alternative Investment Fund (AIF). The Central Bank is proposing to permit Qualifying Investor AIFs to derogate from its general prohibition on lending, subject to specific investor protections and risk management safeguards covering credit assessment, diversification, liquidity, due diligence, leverage, disclosure, reporting and stress testing.