FEATURING Dechert // Dillon Eustace // KB Associates // One Ten Associates
// Point Nine // Quant // Zammit & Associates Advocates
LEGAL ISSUES
Advice for start-ups in the EU
RECRUITMENT
Making the right hires at the right time
CONSULTANCY
Maintaining investor confidence
HOW TO START A
HEDGE FUND IN
THE EU 2012
WEEK
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HFMWeek
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HFM
HEDGEFUNDMANAGER
WEEK
ith just over 15 months to go until the Alternative
Investment Fund Managers Directive (AIFMD) is due
to be written into national laws, 22 July 2013, hedge
fund start-ups are coming to terms with the implications.
Intended to offer more stability and enforce greater
transparency to funds’ operations across the European
Community, the Directive’s stipulations may require more
time and financial resources in order to comply with it,
but the resulting opportunities for fund managers may
make it worthwhile if demand from investors increases.
This

HOW TO START A HEDGE FUND IN THE EU 2012
LEGAL
GERMANY: TRANSPARENT INVESTMENTS
Achim Pütz of Dechert gives an overview of the benefits of a
managed account platform from the perspective of a German
institutional investor
PRIME BROKERAGE
HEDGE FUND IN A BOX, EVERYTHING YOU NEED IN
ONE PLACE…
Jerry Lees of Quant explains the important role of a Mini Prime
broker: to get you to market quickly, bypass set-up and regulatory
delays and raise funds
LEGAL
ATTRACTING THE ‘BEST OF BREED’ FOR MALTA’S
FINANCIAL SERVICES INDUSTRY
Andrew Zammit, chief legal officer of CSB Group, gives an outline of
the Highly Qualified Persons Rules, 2011
RECRUITMENT
START-UP HEDGE FUNDS
Mush Ali of One Ten Associates explains the different challenges
facing COOs of hedge fund start-ups
OPERATIONS
FLEXIBLE SOLUTIONS
Ambasuthan Jananayagam of Point Nine talks to
HFMWeek
about
why start-up managers need to be flexible during uncertain times
CONSULTANCY
HOW TO MEET INVESTORS’ EXPECTATIONS?
Phillip Chapple of KB Associates discusses some of the demands

not only oer investors full transparency, but also an eec-
tive protection against the above-mentioned liquidity con-
straints. In a segregated managed account, the portfolio’s
liquidity derives from the liquidity set by the underlying
nancial instruments, rather than by conicting activities
of other investors who may force the hedge fund manager
to liquidate securities positions and thus take measures to
restrict liquidity.
STRUCTURAL SOLUTIONS
e experiences gained from the nancial crisis caused
Bayerische Versorgungskammer (BVK), the largest Ger-
man public pension scheme – with €50bn AUM – to carry
out an internal analysis of their existing hedge fund invest-
ments. is analysis indicated that it is reasonable for a
large investor such as BVK to invest in single hedge fund
strategies via managed accounts (MACs).
erefore, BVK decided to structure and launch its own
BVK-controlled managed account platform (MAP).
LEGAL STRUCTURAL OBJECTIVES
With regard to the legal set-up of the MAP, the following
objectives in particular had to be taken into account:
y BVK, as the managing and representative body of
twelve professional and local pension schemes (BVK
Pension Funds) wanted to ensure that the BVK Pen-
sion Funds are the sole eligible investors for the MAP
and the portfolios of dierent investment managers
(portfolio managers) to be integrated. e assets man-
aged by the portfolio managers should be held directly
by the respective sub-fund and controlled by the MAP
and its service providers.

Moreover, for eciency reasons, the SIF SICAV S.A.
was structured as an umbrella fund with several sub-funds.
e SIF SICAV S.A. has a central administrator and a
central custodian bank.
e MAP’s ongoing activities are co-ordinated and su-
pervised by a specialised service provider, the MAP opera-
tor, which has been integrated into the MAP by way of a
tailored service agreement. e MAP operator is respon-
sible, among other things, for the following:
y Legal and operational launch of the MAP and new
MACs on the MAP (as well as their liquidation);
y Legal and operational integration of fund infrastructure
into the MAP and the negotiation of service contracts;
y Initial and continuous operational due diligence of the
hedge fund managers and the fund administrator, the
custodian bank and the prime brokers, if applicable;
y Recommendation of investment guidelines for hedge
fund managers and negotiation of investment man-
agement agreements;
ACHIM PÜTZ OF DECHERT GIVES AN OVERVIEW OF THE BENEFITS OF A MANAGED ACCOUNT PLATFORM FROM THE PERSPECTIVE OF A GERMAN
INSTITUTIONAL INVESTOR
GERMANY: TRANSPARENT
INVESTMENTS
Achim Pütz
is a partner in Dechert’s
financial services group and
has extensive experience
in advising both German
and international clients on
traditional and alternative

which is largely in parallel to the regulatory framework
governing the investments of German insurance compa-
nies. erefore, it was necessary to structure the SIF SI-
CAV S.A. and each individual MAC in a way to meet these
regulatory requirements.
UMBRELLA VERSUS STAND-ALONE
An initial question regarding structure involved whether
the launch of one or several umbrella SICAV or the use
of a stand-alone SICAV would be advantageous for each
managed account with regard to the legal and practical
consequences. It was determined to select an umbrella
SICAV, primarily for reasons of practicability and pos-
sible cost savings. Since an umbrella SICAV is a single legal
entity (despite a basically unlimited number of possible
sub-funds), it can be managed under corporate law in a
more ecient way than a number of individual SICAVs,
each with an executive board, general shareholders’ meet-
ings, disclosure requirements, and so forth. In the case of
an umbrella SICAV, eorts to amend organisational docu-
ments would not need to be undertaken for individual
investment vehicles. e legal relationships with central
service providers can also be implemented and
later amended in a more ecient way and with less
documentation requirements.
is increased eciency should result in con-
siderable cost savings with increasing volume.
Furthermore, the launch of new sub-funds is easier
than the launch of a new SIF SICAV S.A. invest-
ment vehicle for each individual managed account.
A potential disadvantage to using an umbrella

hedge funds (and other asset classes) may considerably
increase the transparency and security of such assets
without causing higher costs for investors in the medium
term. ese investment solutions will likely continue to
make their way into the market for the benet of insur-
ance holders, pension fund contributors and/or other
end-investors. Q
THE SET-UP OF A
PROPRIETARY MAP
FOR INVESTMENTS IN
HEDGE FUNDS MAY
CONSIDERABLY INCREASE
THE TRANSPARENCY
”

8 HFMWEEK.COM
HOW TO START A HEDGE FUND IN THE EU 2012
T
he times they are a-changing”, to quote Bob
Dylan, and never more so than in the nancial
sector. Aer 2007’s crises (Lehman, Mad-
ho, Bear Stearns, MF Global and the col-
lapse of numerous hedge funds) we are faced
with a very dierent and complex market,
one more dicult than any of us have faced before. But,
as ever, troubled times throw up opportunities as well as
issues. For many who are now leaving bulge bracket rms
or who are in the process of seing up a new fund or prop
trading business, this is distinctly a time of opportunity
– but not one without risk. Even established mid-sized

a feasible, regulated entity with limited capital, which is
not overwhelmed by set-up and running costs. It needs to
get a reasonable deal for execution costs and potentially
some leverage, so that the trading strategy can be proven.
Meanwhile, it will take you more than 18 months to get
regulatory approval and will cost north of £200,000 to
set up the fund. You will need to get an operating busi-
ness in place and get regulatory approval before build-
ing your track record. At the same time, there are salaries
to be paid, compliance to be dealt with and oces to be
sourced and paid for. It doesn’t take much to realise that
this is likely to be a serious roadblock!
Besides these potential troubles, funds with less than
£75m in assets have diculty nding prime brokers. As a
small player, if they do nd a prime broker, they are oen
faced with high minimums, impossible nancing rates,
limited leverage, high brokerage
fees and second rate service levels.
In addition, the trouble with
seing up a new hedge fund or
prop trading business is that the
people who are most likely to
create eective trading strategies
– which produce the return and
create value – are oen the least
experienced in terms of running
a day-to-day business. ere is a
conict here: unless the business
is set up on sound operational
lines and with a solid understand-

Jerry Lees
is CEO of Quant and
chairman of Linear
Investments. As global head
of Alternative Execution
at CA Cheuvreux on the
executive board, Jerry started
and grew the Electronic
DMA, Synthetic Prime
Brokerage business initially
in Asia and then globally.
HFMWEEK.COM 9
PRIME BROKERAGE
tal introduction) at a stroke is a major opportu-
nity. But we go further in providing outsourced
desk execution, DMA access across global mar-
kets and instruments and a fully technologically
equipped trading desk platform in the heart of
London. Others may wish to select our prime
brokerage oering without the other aspects,
or just come to us for regulatory support while
they build a track record. It’s exible, the choice
is yours.
HOW DOES IT WORK?
On the prime brokerage side, Linear and Quant
consolidate ows and business from more than
60 clients, giving us considerable negotiating
power with global brokers and prime brokers.
Our assets under management and trading ca-
pacity are such that the smaller player is part of a big-

up excess regulatory capital, provides a strong op-
erational structure and allows for a short timeline
to be able to conduct business.
LINEAR/QUANT – MINI PRIME BROKER
e prime brokerage oering enables a hedge fund to uti-
lise Linear/Quant relationships with multi wholesale bro-
kers and a unique set of mini prime oerings. Mini primes
are viewed as an omnibus account aggregated to the prime
brokers, allowing your rm to benet from favourable
pricing and servicing from the prime broker.
In summary, the partnership provides operational sup-
port in seing up, legal, administration and regulatory ad-
vice. In addition, we provide an outsourced trading desk
and regulatory support such as compliance. Access to of-
ce space, trading and technology facilities is also an op-
tion in the context of a hedge fund hotel. With access to
multiple trading accounts, we provide one contact to track
the dierent accounts. In essence, we build an oering tai-
lored to your needs. Q
For further information contact Jerry Lees – CEO Quant
& chairman Linear Investments:
LINEAR/QUANT PROVIDES
TAILORED PRIME
BROKERAGE SERVICES TO
START-UP, SMALL AND MID-
SIZED HEDGE FUNDS
”

A successful
alternative investment firm

most recently been extensively covered by
Bloomberg

and the
Financial Times
, both of which have extensively
praised Malta’s virtues.
e surge in the number of international businesses
establishing some or all of their operations in Malta, par-
ticularly in the regulated industries of nancial services
and internet gaming, has created a marked shortage in the
supply of certain specialised skills within these industries.
ese growing pains have been managed by the Maltese
government through various initiatives including the in-
centivising of advancement into tertiary education and
ongoing training. However, besides such incentives, the
government has also acknowledged the value of aracting
additional human capital possessing the technical knowl-
edge and experience to advance these industries and se-
cure Malta’s position as a centre of excellence in the inter-
national nancial arena.
With this objective in mind, in 2011 the Malta Govern-
ment introduced specic tax rules targeted at highly quali-
ed persons performing particular functions within Mal-
ta-based operators duly licensed by the Malta Financial
Services Authority (MFSA) or the Loeries and Gaming
Authority (LGA). ese rules are contained in the Highly
Qualied Persons Rules, 2011 (HQP Rules).
e HQP Rules are eective in respect of income earned
by qualifying individuals in and from 1 January 2010.

In general terms, anyone seeking to benet from the 15%
tax rate must satisfy all of the following conditions:
1. Derive employment income of at least €75,000
(exclusive of the annual value of any fringe bene-
ts and adjusted annually in line with the domestic
retail price index) which is subject to tax in Malta;
2. Be employed by a company licensed by the MFSA
or the LGA (as the case may be) to hold an eligible
oce in terms of an employment contract, which
is subject to the laws of Malta;
3. Satisfy the MFSA or the LGA (as the case may be)
that:
i. the relevant contract of employment relates to work
genuinely and eectively performed in Malta;
ii. they are in possession of professional qualications in
terms of the HQP Rules; and
iii. they perform activities of an eligible oce.
4. Declare and conrm, inter alia and in the pre-
scribed application form, that they:
i. are not and have not been domiciled in Malta and do
not intend to reside in Malta permanently;
ii. have not beneed from the special domestic tax
HOW TO START A HEDGE FUND IN THE EU 2012
Andrew J. Zammit
is managing partner of
Zammit & Associates –
advocates and chief legal
officer of the CSB Group,
practising company law,
financial services regulation,

It is important to state that the HQP Rules do not ap-
ply in respect of any person employed in Malta prior to 1
January 2008. On the other hand, an individual employed in
Malta on or subsequent to 1 January 2008 would be entitled
to bene t from the favourable  at tax rate, but the said bene-
 ts would nevertheless be limited to  ve years from the date
of commencement of the qualifying employment.  us, for
example, a Swiss chief investment o cer employed with
a Malta-licensed asset management company and having
a qualifying contract of employment in an ‘eligible o ce’
starting in 2008 (basis year) will be able to bene t from the
HQP Rules 15% tax rate for a period of three years – basis
years 2010 (the  rst year in respect of which the HQP Rules
became e ective), 2011 and 2012, – while a third country
national will bene t from one year less.
 e Rules also provide for certain circumstances that
would e ectively exclude the application of the favourable
LEGAL
15% rate, such as where the employer receives any direct
or indirect bene ts under certain business incentive laws,
or if the individual holds more than 25% (directly or indi-
rectly) of the company licensed and/or recognised by the
relevant authority, or if the individual is already in employ-
ment in Malta before the coming into force of the scheme
either with a company not licensed and/or recognised by
the respective authority or not holding an ‘eligible o ce’
with a company licensed and/or recognised by the rel-
evant authority.
 e Rules provide that any person abusively seeking to
claim bene ts under the Rules without entitlement may

 Prime Brokerage Services
 Custodian Service Offering
 Full Execution Services
 Competitive Pricing
 Regulatory Umbrella
14 HFMWEEK.COM
HOW TO START A HEDGE FUND IN THE EU 2012
O
ver the last 12 months we have seen a sig-
nicant increase in the number of start-
ups in the EU, particularly in London.
Below are some of the questions we re-
ceive from our hedge fund start-up clients
and our responses to them.
Q: Our investors and regulators
expect more from us in terms of
governance, systems and pro-
cesses. To what extent can we en-
sure we have our bases covered?
A: e reality is the investors
want to be comfortable the COO
has the background to be able to
handle the increased complex-
ity of regulation, governance and
controls.
e good news is the COO can-
didate market has matured so their
experience and knowledge level of
the requirement is also demonstrated in what they have
performed for other funds.

hedge fund recruitment firm.
He qualified as a chartered
accountant before starting
his career in recruitment
nearly 10 years ago. A
specialist in the sector, his
expertise lies in finding
“non-investment” talent for
the hedge fund industry
and service providers.
HFMWEEK.COM 15
RECRUITMENT
has been signicant in geing both regulatory ap-
proval and investor condence.
Alongside this, we have seen an increase in de-
mands on compliance and in-house management
of compliance, certainly when a fund looks at a
multi-jurisdiction fund, for example FSA and SEC.
At that point the need for someone with legal and
compliance knowledge is vital.
e outsourced compliance providers seem to
be doing an excellent job of supporting COOs
through this journey, but aer 12 months invari-
ably they realise they need someone managing this
full time.
ere is no exact answer to how this is managed,
but the hires around the infrastructure need to be able to
cope with a variety of expertise, from day-to-day opera-
tions to accounting, legal and compliance issues.
It is unrealistic to expect a COO to be an expert in all

the risk they are taking. ere are of course dierent tools
in place to achieve this when trying to aract the top-end
high-calibre infrastructure talent.
CONCLUSION
In conclusion, the challenge for start-up hedge funds is the
absolute need to bring quality non-investment talent. It is
more demanding now than it has ever been, and for two key
reasons: the infrastructure and regulatory demands of what
needs to be in place and the increasing inuence of the ex-
isting investors and perception of future investors.
However, one thing that has remained constant is that
both investment and non-investment professionals con-
tinue to be driven and motivated by the hedge fund sector
and that is what is amazing to see, despite the challenges
in the industry over the last ve years. Q
THE CHALLENGE FOR
START-UP HEDGE FUNDS
IS THE ABSOLUTE NEED
TO BRING QUALITY NON-
INVESTMENT TALENT
”

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0DUN7KRUQH

'LOORQ(XVWDFH
6LU-RKQ5RJHUVRQ¶V4XD\
'XEOLQ


consensus within the fund management
industry appears to be forming that in-
vestors should brace themselves for a
period of less than exciting returns as a
result of the prevailing macro-economic
headwinds.
Middle and back oce solutions, whilst less interest-
ing than contemplating the changing global dynamics, is
impacted by it and more importantly, the decisions that
fund managers make in this critical aspect of a fund’s in-
frastructure will determine their ability to navigate these
austere times.
DEMANDING INVESTORS
Investors have already reacted to the shiing balance of
power. Many fund managers will
confess that the investor commu-
nity, and in particular seed inves-
tors, are taking advantage of the
current climate.
Further, many fund managers
will admit that double-digit returns
seem unlikely in the medium term.
In such a climate, refocusing on
operational alpha (in particular
outperformance via cost ecien-
cies) is almost mandatory.
However, focusing on headline
direct costs alone isn’t prudent. Ex-
penditure on variable and indirect items can outweigh by
multiples the savings made on low-cost solutions.

tributor to (bank) return on equity was leverage, rather
than operating margin”, echoed the
Financial Times
’ Lex
column on 29 March. It was per-
haps inevitable that banks would
reassess all their business lines.
Prime brokerage divisions, like
other internal departments, will
need to demonstrate concrete rev-
enues from clients, regardless of
their size.
IMPLICATIONS FOR START-UPS
e result is an uncertain climate
for the start-up manager in 2012.
e temptation is to contain the
contracted xed costs of third-
party vendors. However, inexible solutions can have -
nancial repercussions when change is needed. Further, the
growth and performance of the fund will depend much
more on understanding the indirect and variable costs
too, which will eventually outweigh the xed costs by mul-
tiples.
It is critical to any business to curb xed costs. In the
middle oce space the spectrum of costs (and resultant
services) can vary quite substantially. In last year’s price
race to the boom the vendor market oered some star-
tling deals to high pedigree start-ups.
However, funds need to look beyond the headline pric-
es and consider their growth, which will vary based on the

a fund as much as 40 cents in bid-oer costs (for
example $40,000 on a $10m, three month, EUR/
USD, forward contract). ese are hey costs given
the liquid nature of G7 FX forwards market.
e ability to incorporate collateral manage-
ment capabilities will permit direct dealing on
OTC derivatives with multiple counterparts and
can slash such indirect costs by over two-thirds.
is is one of many reasons funds set up indepen-
dent middle oce capabilities as soon as they can
aord to.
DUE DILIGENCE REMAINS STRINGENT
For its part, the investor community has main-
tained the stringent due diligence demands intro-
duced during the crisis. Taking into account the
ra of impending legislation, fund managers’ op-
erational hurdles have never been higher. Some of
the components of the checklist are having multi-
prime broker/custody arrangements, transparent
reporting including items such as counterparty risk (ideal-
ly on a daily basis), independent operations processes and
valuations, comprehensive disaster recovery procedures
and a string of other essentials.
Scandals like Mado have made some of these require-
ments non-negotiable. Aer all, if Mado had had inde-
pendent counterparty risk reports, investors would have
known exactly where their assets were held.
Further, a ra of new regulations are pending imple-
mentation over the coming years. e key to compliance
may lie within the operational infrastructure set up by the

challenges in planning a funds infrastructure. In
the middle oce space, for example, variable
costs include everything from internal opera-
tions personnel (where an outsourced solution
is not complete or there is no outsourcing); the
technology resources and spend when there are
problems with the technology infrastructure; to
management time spent on dealing with these
‘engine room’ issues. e fund manager needs
to allow for changes in third parties, expansion
of requirements (for example collateral man-
agement, valuations, and so on) and changes in
the types of instruments traded. e last thing a
fund needs are crippling bills to change the as-
sociated infrastructure.
Minimising large indirect costs: A decision to
implement a low xed cost middle oce solution
can result in a less exible infrastructure. As the
fund grows, its dealing costs and funding cost
can become a multiple of its infrastructure cost.
is is a key reason funds develop independent
middle and back oce capabilities, as trimming
those indirect costs will result in genuine ‘alpha’.
CONCLUSION: BE PREPARED
2012 will continue to provide a challenging environment
for start-up managers. e key to managing the uncertain-
ty will be exibility. For middle and back oce that means
not necessarily choosing the cheapest available solution,
but a solution or solutions that will evolve with the fund.
Investor demands haven’t relented and so geing the

because aer the 2008 crisis investors retracted from the
start-up space into the bigger safer options. But then inves-
tors came back looking for more interesting and smaller
funds, looking for an access to higher alpha opportunities.
HFM: What are the main challenges when starting a
hedge fund?
PC: Managers have to nd the
right balance between building a
viable business and demonstrat-
ing the requisite controls and risk
mitigation in their infrastructure.
It would be straight forward for a
manager with $70m AUM to build
everything that is required to meet
the level of investors due diligence
required by the average hedge fund
of fund. So the challenge for a start-
up is to work out in detail what are
the risks related to its strategy and
how to mitigate them while building a viable business. In
other words, the manager has to comfort the investor that
he knows what he is doing and that the risks they are buy-
ing are all in the strategy and not in the infrastructure.
HFM: How can start-ups aract an investor’s interest?
PC: e main thing is to start with an interesting alpha
proposition and this is the toughest part for a start-up.
Even though it is not easy, you can build an appropriate
infrastructure, you can set up all the operational require-
ments and meet all the due diligence requirements. But
you need to have a core alpha opportunity, which is well

are interested in. You need to have
those unique selling points that in-
vestors can see and that make them
want to buy that risk.
HFM: What are the key require-
ments from investors that constitute a challenge for a
start-up? And how can a start-up overcome these hurdles?
PC: One of the main challenges for a start-up manager is
a lack of transparency. Although the investors’ standards
have risen, it is quite rare to get eective feedback from
many of the investors, mainly because of how they are
structured. Investors are looking at a number of names
and trying to shortlist a few that they want to invest in.
Due diligence is in the main now performed before rather
than aer the investment decision. e main way to nd
out is to try to step back and take a realistic third-party
view of your oering, and try to identify all the risks in
both the product and the infrastructure, because that is
what a potential investor will look to do. Investors want
to understand the risks that make up the strategy but they
want to identify risks due to the infrastructure of the fund
or manager and to identify if any level of control is miss-
ing, for example around cash management, corporate
THE MAIN THING IS
TO START WITH AN
INTERESTING ALPHA
PROPOSITION
”

PHILLIP CHAPPLE OF KB ASSOCIATES DISCUSSES SOME OF THE DEMANDS OF STARTING A HEDGE FUND INFRASTRUCTURE

ments?
PC: We project manage the full set-up for a manager. So
we help them choose their lawyers, their compliance advi-
sors, their prime brokers, their administrator and their sys-
tems. We are not just trying to select them, we look at the
operating procedures around each of those providers and
we help negotiate the Service Level Agreements (SLAs),
we look to build an operational infrastructure, which will
give comfort around the necessary controls and process
for the manager’s strategy, build the corporate governance
and then create the Due Diligence Questionnaire (DDQ).
We look at everything the manager needs, to make sure he
can pass due diligence.
HFM: What is the key point a manager should always
have in mind when starting a hedge fund?
PC: e manager always has to think in terms of how the
investor thinks and always has to try to take a third per-
son’s view of his product because in eect he needs:
• A reason for the investors to invest: it is not enough
to build a start-up and hope the investors will come.
e manager needs to have a distinctive proposition
for them.
• To look at every part of his oer and make
sure there are no inappropriate risk exposures.
If he doesn’t identify them, an investor may
pick them up and is unlikely to tell him about
it. It is important to read through every single
document. It might seem boring or he might
feel that he has paid other people to dra these
documents, but he has to understand all fac-

FIND THE RIGHT BALANCE
BETWEEN BUILDING A
VIABLE BUSINESS AND
DEMONSTRATING THE
REQUISITE CONTROLS AND
RISK MITIGATION IN THEIR
INFRASTRUCTURE
”

CONSULTANCY
HFMWEEK.COM 21
LEGAL
A
s investors are seeking more security, trans-
parency and regulation, and as fund manag-
ers seek to broaden their distribution bases,
more and more managers are looking to reg-
ulated jurisdictions as alternative domiciles
of choice to traditional oshore solutions.
Ireland has long been considered the regulated jurisdiction
of choice for fund managers, oering exibility, expertise,
international brand recognition and a favourable tax regime
to the global funds industry for more than 20 years.
e European community has more recently moved to
provide a regulated solution for alternative funds with the
Alternative Investment Fund Managers Directive (AIF-
MD), which will become law across the European com-
munity by 22 July 2013. e AIFMD, which applies to any
so-called Alternative Investment Fund Manager as dened
in the AIFMD, oers a pan-European passport to compli-

QIFs are subject to a minimum subscription require-
ment of €100,000 per investor and investors must meet
certain appropriate expertise/understanding tests. An ex-
emption from these requirements is available to the QIF’s
managers and other persons that are closely connected
with the management of the QIF.
FAST TRACK AUTHORISATION FOR QIFS
e Central Bank of Ireland (Central Bank) does not
require prior ling or review of fund documentation for
QIFs. Instead, there is a self certication regime (certi-
cation has to be given by the QIF and by the Irish legal
advisers). With certication, the fund documentation is
simply negotiated between the promoter, the legal advis-
ers and the other service providers and then executed and
led with the Central Bank. Provided that the documenta-
tion is led by 3pm on the day prior to the date for which
authorisation is sought, the QIF will be authorised on the
requested date without a prior review. A ‘spot check’ post
authorisation review may then take place.
QIF LIQUIDITY AND INVEST-
MENT RESTRICTIONS
QIFs can be structured as open-
ended, open-ended with limited li-
quidity, limited liquidity or closed-
ended schemes. Gates, deferred
redemptions, holdbacks, in-kind
redemptions and side pockets can
all be facilitated within these types
of funds.
QIFs are subject to very few in-

in 2003 and became a
partner in 2010. She advises
primarily in the area of
investment funds and
has particular expertise in
exchange traded funds,
hedge funds, sophisticated
Ucits and has also advised
in relation to the listing rules
of the Irish Stock Exchange.
DERBHIL O’RIORDAN OF DILLON EUSTACE EXPLAINS IRELAND’S BENEFITS AS A REGULATED JURISDICTION FOR ALTERNATIVE FUND INVESTORS
AND FUND MANAGERS
QUALIFYING INVESTOR FUNDS –
THE REGULATED ALTERNATIVE
22 HFMWEEK.COM
HOW TO START A HEDGE FUND IN THE EU 2012
(d) Irish Funds may not grant loans, though there are so
many exceptions to this rule as to make the rule virtually
redundant. For example, a QIF may acquire a loan, may
acquire a debt security (including a promissory note or
other securitised loan), may make deposits, may enter any
kind of derivative or may enter into reverse repo agree-
ments.
(e) Borrowing and leverage are not subject to a regula-
tory limit.
QIFS FOR MULTI-JURISDICTIONAL DISTRIBUTION
For fund managers seeking a global marketing solution,
particularly involving US investors, one way of structuring
the QIF for optimum distribution is to use a single Irish
‘master’ fund as a hub and then one or more ‘feeder’ funds

company (the Non Irish Feeder
Fund). e Non-Irish Feeder
Fund will be targeted at US tax-
able investors and is oen op-
tional. From a tax and regulatory
perspective, US taxable investors
could invest directly in the Irish
Master Fund instead of investing
indirectly through their invest-
ments in the Non-Irish Feeder
Fund.
• e Irish Master Fund
invests directly in the underlying
assets availing of Ireland’s exempt
domestic taxation regime for pay-
ments or transfers to the Irish and
Non-Irish Feeders. e sole in-
vestors in the Irish Master Fund
will be the feeders and they may invest directly in a
single pool at the Irish Master Fund level or in seg-
regated sub-trusts, if the master is established as an
umbrella fund. e Irish Master Fund can also oer
multiple unit/share classes or series to the feeders.
• e Irish Feeder Fund and Non-Irish Feeder Fund
acquire units/shares in the Irish Master Fund, which
uctuate in value in accordance with the perfor-
mance of the assets at the Irish Master Fund level.
e liquidity at the level of the feeder funds and the
Irish Master Fund level can be matched.
TAXATION

- Provision of Directors
- MLRO Services
- Liquidations
- Investment Manager Start-up
- Operational Oversight
- Due Diligence Preparation
- Fund Re-domiciliation
- Infrastructure Review /
Development
In
d
e
p
en
d
ence
Commitment
p
E
x
p
ertis
e


www.kbassociates.ie
LONDON
Phillip Chapple
42 Brook Street, London
W1K 5DB