Central Bank of Ireland reviews delegation in the funds sector

CBI’s 2026 review confirms delegation remains central to Ireland’s funds model, while signalling governance, oversight and data enhancements for FMCs.

The Central Bank of Ireland (CBI) has announced a comprehensive review of governance arrangements for Irish fund management companies (FMCs), following its thematic Review of Delegation in the Irish Funds Sector, published in July 2026.

The findings will feed directly into a broader review of FMC governance requirements, including the delegation framework, the pre approval controlled function (PCF) regime and the possible extension of the Individual Accountability Framework / Senior Executive Accountability Regime (IAF/SEAR) to the funds sector.

Background and Context

AIFMD contained very specific requirements regarding delegation and, at the time of implementation, there had been concern that the rules regarding delegation and ensuring that AIFMs were not letter box entities would necessitate the establishment of substantive AIFMs by managers outside of the EU (principally the US) in the EU. Many managers did establish AIFMs, but, over time, the substance requirements for proprietary AIFMs led an increasing trend to engage third-party AIFMs. Delegation is core to the business model of these AIFMs and Delegation Oversight was a core feature and the first chapter of the CBI’s FMC Guidance (more commonly known as CP86).

Scope and key findings of the CBI review

The CBI’s central message is that while delegation brings clear benefits (as it provides access for investors to managers in the key US and UK markets), it must be supported by robust governance, oversight and data capabilities, within the EU with responsibility and control retained at FMC level.

Ireland currently hosts 121 authorised FMCs, operating within UCITS and AIFMD frameworks which permit delegation of functions such as portfolio management and risk management subject to specific safeguards. Most Irish FMCs delegate portfolio management (and sometimes aspects of risk management) to group entities or third party managers both inside and outside the EU with a large concentration of US and US managers.

The CBI’s review, launched in 2025, combined:

• A quantitative data request to 125 FMCs (i.e., to all FMCs at the time of the review);
• A qualitative survey to all FMCs (with a bespoke version for third party FMCs);
• Desk based reviews of approximately 40 FMCs (c. 4,600 funds); and
• On site inspections at 21 FMCs (c. 40% of AuM; ~3,000 funds).

Overall, the CBI stated that the findings were encouraging and that FMCs are generally operating effective delegation frameworks in line with regulatory requirements and supervisory expectations, with good-quality governance, controls, oversight processes and data capabilities. However, a number of FMCs require enhancements to aspects of their governance and operating models, and a small subset fell “materially short” of expectations and are subject to time-bound remediation programmes.

The CBI structures its findings under five themes: Governance, Portfolio Management, Risk Management, Delegate Oversight and Data Capabilities.

1. Governance – independence, resourcing and local control

The CBI expects “fit for purpose” governance frameworks that ensure funds are well run and risks are effectively managed, and that delegation does not go so far that the FMC loses effective control or risks becoming a letterbox entity.

• What works well: Most FMCs show strong governance, with diverse and experienced boards, clear reporting lines, local committees to challenge delegates and effective use of group expertise within defined governance structures.
• Where improvement is needed: In some FMCs, board independence is insufficient, designated persons are either too stretched or not sufficiently senior, there is over reliance on group level committees, and governance is overly informal with limited policies and entity specific risk statements.

The CBI’s message is that governance must be genuine and effective rather than a box‑ticking exercise, and oversight must involve real control rather than merely nominal supervision, with FMCs demonstrably able to discharge the regulatory responsibilities assigned to them.

2. Portfolio management – oversight, autonomy and contingency planning

Portfolio management is frequently delegated, but oversight is generally “robust and well executed”.

• What works well: FMCs typically maintain structured oversight (regular engagement, performance analysis, reporting, clear escalation), put contingency plans in place for delegate termination, and show appropriate substance where portfolio management is retained in house.
• Where improvement is needed: Some FMCs cannot demonstrate sufficient autonomy in their oversight and decision making, others lack documented procedures, performance standards and regular monitoring, and some have limited or under developed wind down/transition plans for third party portfolio managers.

These issues are particularly sensitive given the increased EU focus on non-EU delegation and recent UCITS/AIFMD changes introducing additional non-EU delegation disclosures.

3. Risk management – retained function, but delegation and data gaps

Risk management is “largely retained” by FMCs, and frameworks are generally well established and policy-driven.

• What works well: Retained risk functions provide independent oversight, set risk limits and monitor compliance; many FMCs independently verify delegated risk activities using shadow checks, real time data and pre trade controls.
• Where improvement is needed: Where core risk tasks are delegated, some FMCs’ governance and risk measures need strengthening to meet the Central Bank’s Cross Industry Guidance on Outsourcing; risk resourcing must be enhanced in certain firms; and some FMCs rely heavily on delegate reporting without robust independent challenge or real time data, with timely, accurate data identified as a “material differentiator” in risk effectiveness.

4. Delegate oversight – own due diligence vs group processes

Most FMCs have delegate oversight frameworks and recognise the importance of ongoing monitoring and performance assessment.

• What works well: FMCs commonly adopt risk based due diligence (DDQs, RAG scoring), use SLAs/KPIs and regular reporting to track performance and operations, and conduct targeted annual on site visits to assess delegate capabilities and controls.
• Where improvement is needed: Some rely on group processes for due diligence instead of FMC led assessment; local FMC management is under represented on group committees dealing with delegation; and designated persons and operational risk functions are not always adequately involved, with reliance on group or seconded personnel.

These findings link to wider concerns around letterbox entities and the need for effective local substance and accountability.

5. Data capabilities – strategic asset with integration and resilience gaps

Data is emphasised as a critical enabler of effective oversight and decision making, especially in delegation heavy models.

• What works well: Many FMCs increasingly treat data as a strategic asset, with larger firms introducing data improvement programmes, automated reporting and BI tools; formal data policies on acquisition, retention and accuracy; and dedicated data resources or teams in more complex firms.
• Where improvement is needed: Some FMCs have fragmented data architectures with disparate systems and manual reconciliations; delegate key controls such as pre/post-trade checks and investment/borrowing restrictions, including overrides of internal risk limits; and lack robust processes and contingency plans for data loss or interruption.

Next Steps – Changes to existing Governance Requirements

The CBI situates its work in a more complex environment, with changing investor expectations, geopolitical uncertainty and rapid technological change, including greater use of AI and automation.

The CBI stated it will review FMC governance arrangements this year (2026) including enhancements to the current delegation framework. Areas in scope of the review include:

• Review and enhancement of governance requirements, including CP86 and the CBI’s Cross Industry Guidance on Outsourcing
• Simplifying and reinforcing the PCF framework for FMCs
• Considering proportionate application of IAF/SEAR to the funds sector.

Call to Action for all FMCs

The CBI expects all FMCs, not just those sampled, to respond to the report by:

• Considering its contents at FMC board level.
• Conducting an analysis of supervisory expectations and observations against their own arrangements.
• Putting in place a time bound plan by year end to address any gaps in operational, resourcing and governance arrangements relating to delegation.

The CBI has already commenced supervisory engagement and RMPs with FMCs where shortcomings have been identified.

Simmons & Simmons comments

1. Delegation model reaffirmed – a positive signal for Ireland

The CBI’s report sends an important positive message for the Irish funds industry: delegation and outsourcing remain a well established and integral feature of both the Irish funds ecosystem and the broader European asset management operating model. The findings confirm that, when coupled with appropriate governance and oversight, delegation continues to be recognised as a legitimate and necessary mechanism for accessing global expertise, supporting diversified investment strategies and maintaining Ireland’s position as a leading global funds domicile.

For market participants and sponsors considering Ireland, this reaffirmation is critical. It reinforces regulatory continuity in Ireland’s long-standing delegation model, even as supervisory standards are tightened and expectations on substance and oversight evolve.

2. Proactive governance reform – aligned with a more complex, tech driven environment

The CBI’s planned review of FMC governance arrangements reflects a proactive and forward-looking approach. The regulator is signalling that governance and oversight frameworks must continue to evolve alongside an increasingly complex operating environment, while remaining proportionate and tailored to the scale and risk profile of each FMC.

This is particularly relevant as asset managers rapidly adopt advanced AI and automation across their investment, risk and operational workflows. The CBI has consistently indicated that innovation and AI-enabled efficiencies are welcome, but must operate within a robust framework of governance, responsibility and accountability. Asset managers will need to ensure that AI-driven processes are properly understood and overseen by boards and control functions, and that delegation arrangements are updated to reflect changes in technology, data flows and decision-making chains.

3. Regulatory clarity and predictability as competitive advantages

In an increasingly competitive global market for fund domiciles, regulatory clarity and predictability are strategic strengths for Ireland. The CBI’s clear articulation of expectations around delegation, governance, data and accountability – and its intention to streamline and reinforce relevant guidance – contributes to a stable and transparent supervisory environment.

A strong but proportionate governance framework underpins investor protection while supporting sustainable growth and innovation in the Irish funds industry. For FMCs and their global sponsors, this combination of high standards and regulatory predictability should enhance Ireland’s attractiveness as a domicile of choice, particularly for complex cross-border delegation structures and managers seeking to scale AI-enabled operating models within a clear and robust regulatory perimeter.

4. What boards should be considering

Independence and governance

• Is there too much group influence?
• Are directors serving past “best practice” tenure limits?
• Is there sufficient challenge and diversity?

Substance and resourcing

• Are the designated persons sufficiently senior, and will they pass the fitness and probity process?
• Are individuals undertaking too many designated person roles?

Oversight of delegates

• Is delegate oversight carried out at FMC level or is it, in reality, a group function?
• Are on-site visits and direct due diligence being undertaken?

Data and risk management

• Does the FMC have sufficient risk management capability?
• Is there capacity to challenge portfolio managers?
• Is there direct access to data rather than reliance on delegate reports?
• What contingency plans are in place, particularly if a delegate fails?