Linear Investments recently launched its own ICAV fund. Here, we take a look at what an ICAV is, how it works and its benefits
What is an ICAV?
The Irish Collective Asset-management Vehicle (ICAV) is a form of collective investment vehicle. It sits alongside existing fund structures (Unit Trusts, Common Contractual Funds, Investment Limited Partnerships, and Part XIII Investment Companies). The ICAV is a form of collective investment vehicle for UCITS funds and Alternative Investment Funds.
An ICAV provides managers and promoters with a corporate structure that is designed specifically for investment funds and which is not subject to rules or requirements designed for other forms of company, thereby helping to reduce administrative burden and cost.
Like an investment company, an ICAV is a corporate entity that is governed by a board of directors and owned by shareholders. ICAVs are regulated funds and, therefore, have all of the benefits of a regulated structure.
How does it work?
The Central Bank in Ireland is both the registration and the supervisory authority for the ICAV. The ICAV has its own legislative regime which ensures that it is not impacted by company law changes designed for ordinary companies.
Investors own shares in the ICAV and the ICAV is able to issue and redeem shares continually according to investor demand. Thus, the ICAV is no different to other open-ended collective investment schemes. The ICAV may also be established as a closed ended scheme, subject to Central Bank requirements.
An ICAV must have a board of directors to govern its affairs, with a requirement for a minimum of two directors. The board of directors of an ICAV may dispense with the holding of an annual general meeting by giving written notice to all of the ICAV’s shareholders.
An ICAV is not required to spread risk, unlike an investment company and may be listed on a stock exchange.
What are the benefits of an ICAV?
The ICAV legislation modernises the corporate fund structure and is conceived specifically with the needs of investment funds in mind. As a bespoke corporate investment fund vehicle, a fund established as an ICAV has the advantage that it is not impacted by amendments to certain pieces of European and domestic company legislation that are targeted at trading companies rather than investment funds.
An important feature of the ICAV is that it is able to elect its classification under the US check-the-box taxation rules. The Irish investment company is not permitted to check-the-box for US federal tax purposes. The ability of an investment fund, such as the ICAV, to check-the-box can be helpful to US investors in investment funds, as it allows them to be subject to US tax as if they held the underlying assets in the fund directly. For fund promoters wishing to market European funds to US investors and having a preference for doing so through a corporate vehicle, the availability of the ICAV represents a significant development.
If you would like to know more about Linear’s ICAV Structures, please contact James Churchman at firstname.lastname@example.org