Ireland sets out position on AIFMD 2 and UCITS Directive derogations

On 8 May 2025, the Irish Government published a Feedback Statement (dated 'April 2025') to its November 2024 consultation paper.

The consultation paper looked at the discretions available to Member States under Directive (EU) 2024/927, (the Amending Directive). The Feedback Statement explains how the Government intends to exercise each of these.

The Amending Directive introduced a number of changes to the Level 1 texts of the AIFMD and the UCITS Directive in the areas of:

• delegation arrangements

• liquidity risk management

• supervisory reporting

• the provision of depositary and custody services and

• loan origination by alternative investment funds (AIFs).

Our series of client notes on the key changes made (with a focus on AIFMs) can be found here.

Key points to note

The Irish government confirms that, of the four available derogations, it will exercise three in full. Of particular interest, it will

• allow UCITS ManCos to take advantage of the expanded list of non-core services including reception and transmission of orders 

• prohibit a loan originating fund - whether domiciled in Ireland or elsewhere - from granting loans to Irish consumers. (Note, though, that it is unclear how the term 'consumer' will be defined in this context.)

• not allow an Irish-domiciled AIF to appoint a depositary established outside Ireland.

Next steps?

Member States must transpose the changes made by the Amending Directive into their national law by 16 April 2026 and the Department of Finance confirms it will introduce the legislation needed to meet this deadline.

What are the discretions and how will the Irish Government exercise them?

1.    'Non-core' activities under Article 6(4) of AIFMD

Under Article 6(2) of AIFMD, external AIFMs cannot engage in activities other than those in Annex I of the Directive (plus the additional management of UCITS, subject to authorisation under the UCITS Directive).

Article 6(4), though, allows Member States to authorise external AIFMs to provide a number of ancillary activities and non-core (or 'top up') services.

The Amending Directive

• extends the list of ancillary activities which an external AIFM can provide under the derogation to include (a) the administration of benchmarks and (b) credit servicing activities and

• clarifies that AIFMs can perform, for the benefit of third parties, the same functions and activities that they already perform in relation to an AIF as part of their 'non-core services'. This, though, is dependent on any potential conflicts of interest being appropriately managed.

Ireland has decided to exercise this discretion in full -  the Central Bank will be able to authorise external AIFMs to engage in the additional ancillary activities and non-core services allowed under the Amending Directive.

2. 'Non-core' services under Article 6(2) of the UCITS Directive

Article 6(2) of the UCITS Directive requires that (with some exceptions) UCITS ManCos do not engage in activities other than the management of UCITS, as per the functions set out in Annex II of the Directive.

A derogation in Article 6(3) of the UCITS Directive, though, permits Member States to authorise UCITS ManCos to provide certain additional, 'non-core' services - the list of these services was extended by the Amending Directive to include:

•      the reception and transmission of orders in relation to financial instruments

•      provision, for the benefit of third parties, of the same functions and activities that the ManCo already performs in relation to a UCITS that it manages. This, though, is dependent on any potential conflicts of interest created by the provision of a function or activity to other parties being appropriately managed.   

The amendment also allows Member States to authorise ManCos to offer the administration of benchmarks as an ancillary service.

Ireland has decided to exercise this discretion in full.

The Central Bank will be able to authorise UCITS ManCos to engage in the relevant ancillary services and non-core services.

3.    Loan origination: granting loans to customers in a Member State's territory

The loan origination regime introduced by the Amending Directive permits a Member State to prohibit loan originating funds (LOFs) from granting loans to consumers in its territory, irrespective of where the fund is domiciled.

Ireland has decided to exercise this discretion in full.

This means that all LOFs - wherever domiciled - will be prohibited from granting loans to Irish consumers. As yet, though, it is unclear how the term 'consumer' will be defined in this context.

4.    Appointing a depositary established outside Ireland

Under Article 21(5) of AIFMD, as amended, Member States may allow a depositary established in another Member State to be appointed, provided that, among other things, the AIFM submits a reasoned request which demonstrates that there is a lack of appropriate depositary services in the AIF's home Member State.

The Feedback Statement notes that the Irish market is well served by depositaries - as at 31 December 2024, there were 25 custodians in Ireland.

Ireland has decided not to exercise this discretion - the Central Bank will not be permitted to allow an Irish-domiciled AIF to appoint a depositary established outside Ireland.