Conor Durkin of Pinsent Masons was commenting after the CBI opened a consultation on a series of proposals to amend its rulebook for alternative investment funds (AIFs).
One aspect of the proposals concerns loan originating funds – a form of AIF that has become a source of private credit for a growing number of businesses across Europe in recent years.
To address risks considered to arise from the growth of the less-regulated private credit market, EU policymakers moved to update its AIF Managers Directive (AIFMD) by regulating the activities of managers of loan originating funds. EU member states have until 16 April 2026 to transpose the reforms contained in AIFMD II into domestic legislation. The CBI’s consultation on updates to its AIF Rulebook is designed to affect transposition of AIFMD II in Ireland.
In its consultation paper, the CBI has set out plans to remove its domestic framework on loan origination funds. If adopted, this would eliminate any ‘gold-plating’ of the EU rules that apply to those funds, in Ireland.
The CBI has also proposed amendments to its AIF Rulebook that will allow non-EU AIFMs such as those based in the UK or US, to manage Irish-domiciled loan-originating AIFs targeted at professional investors, known as QIAIFs. According to Durkin, loan-originating strategies can be efficiently managed within a QIAIF structure, and a QIAIF managed by a UK or US AIFM may be distributed within the EU under national private placement regimes (NPPRs) made available by individual member states, without the need to obtain an AIFMD marketing passport.
Durkin said: “The proposed removal of the loan origination chapter is very positive. It means that managers of Irish loan origination AIFs will have greater flexibility in relation to borrower types and asset exposures. This development will introduce a harmonised regime in the EU for loan origination activity which should support the further growth of European loan origination funds and enhance Ireland’s attractiveness as a domicile for loan origination and private credit.”
Beyond loan originating funds, the CBI has proposed to remove the existing requirements relating to the operation of wholly-owned subsidiaries, such as the requirement that the board of the subsidiary be comprised of a majority of the directors of the QIAIF. In place of those rules, the CBI has proposed to require AIFMs to disclose the use and purpose of wholly owned subsidiaries and intermediary investment vehicles in the QIAIF prospectus, carry out due diligence on the vehicles, and implement policies and procedures for the oversight and monitoring of any such vehicle.
Durkin said: “The removal of the requirement for directors of the QIAIF to comprise most of the board of the intermediary vehicle will enable intermediary vehicles to be used efficiently for the acquisition and management of private market investments in a way that complies with the governance requirements and commercial needs of the underlying asset.”
Other reforms proposed impact fund financing. The CBI has proposed to remove the existing general restriction on QIAIFs on granting loans and acting as a guarantor for third parties, which Durkin said caused difficulties for QIAIFs in providing financial support to subsidiary vehicles.
“These amendments should assist the development of fund financing arrangements, such as the cross collateralisation and the provision of broader and more comprehensive security for lenders, which might reduce the overall financing costs for QIAIFs” Durkin said.
Rules regarding the equal treatment of shareholders are also to be scrapped.
Currently, the AIF Rulebook requires that unitholders of the same share class be treated “equally”. This requirement has caused ambiguity in the context of AIFMD preferential treatment requirements, Durkin said. To address this, the CBI has proposed to remove reference to the requirement for equal treatment and instead provide that unitholders may be treated fairly while taking into account AIFMD preferential treatment requirements.
Durkin said: “The requirement for equal treatment under the AIF Rulebook can be complex to apply in practice, so the proposed amendment is a welcome development. It will enable managers to enter into side letter arrangements tailored to the needs of investors, such as around investor reporting, voting control, or representation on Limited Partner Advisory Committees, which often require investor-specific consideration.”
A further change proposed would impact arrangements concerning the temporary holding of assets, known as warehousing.
At present under the AIF Rulebook, a QIAIF is prohibited from paying more than the current market value for a warehoused asset. Under the CBI’s plans, this restriction would be removed, subject to disclosure in the private placement memorandum of the terms of the warehousing arrangements, and the obligation of the AIFM for the proper valuation of assets.
The CBI has also proposed to remove the existing requirement that the initial offer period of QIAIFs implementing private asset, loan origination, or real estate strategies be no longer than two years and six months.
Firms have until 5 November 2025 to respond to the CBI’s consultation.