There is no statutory or common definition of the term "hedge fund". The term is a loose description of many different types of investment funds or investment funds using a variety of investment techniques.
Investment funds are usually constituted as investment companies under Part XIII of the Companies Act 1990, as unit trusts under the Unit Trusts Act 1990 or as investment companies or unit trusts coming within the scope of the Undertakings for Collective Investment in Transferable Securities or UCITS regulations.
Investment funds are subject to authorisation and supervision by the Irish Financial Services Regulatory Authority, IFSRA, which is empowered under the relevant legislation to impose any conditions it considers necessary and prudent for the orderly and proper regulation of investment funds. I am informed by the IFSRA that it does not authorise hedge funds per se, but that it has authorised certain types of funds which have some of the characteristics of hedge funds. The authorisation of such funds is subject to conditions designed to protect the investor.
I understand from IFSRA that it has authorised approximately 50 such funds, the majority of which are what are known as qualifying investor funds while the remainder are professional investor funds. These funds are subject to certain conditions imposed by IFSRA including, in the case of qualifying investor funds, a minimum subscription requirement of €250,000 and investors are required to meet a net worth test and to certify in writing that they are aware of the risks involved in the investment. There are no limits on the investment strategies adopted. In the case of professional investor funds, the minimum subscription requirement is €125,000 and the investment strategies adopted are subject to limits.
I am further informed by IFSRA that following submissions from the Irish funds industry and in keeping with IFSRA's own view of the evolution of fund regulation in Ireland, it has indicated to the industry that it is prepared to consider the authorisation of investment funds with hedge fund characteristics at retail level subject to certain investor protection safeguards being incorporated in the product. I understand, however, that no such funds have been authorised by the authority to date. Furthermore, the authority does not consider it appropriate to authorise retail funds engaging directly in hedge fund strategies.
Additional informationAll investment funds authorised by IFSRA, whether or not they have some hedge fund characteristics, are subject to monthly reporting requirements in addition to more detailed six monthly reports and fully audited annual reports.
Aside from introducing new regulations implementing the UCITS management directive, I have no plans to introduce further regulation of investment funds. However, if IFSRA considers it necessary to strengthen the existing regulatory regime, it will make appropriate proposals to me in this regard.