Meliosa O’Caoimh, Country Head, Ireland, Northern Trust: For asset managers, we see the appeal of operating portfolios that can be distributed through both listed and unlisted structures. Among the key considerations for this hybrid fund structure is the question of how fees can be fairly applied for all investors.

Unlisted classes may apply an aggregated dealing spread or dilution levy, whereas listed trades typically apply the actual deal cost per investor deal. Regulatory clarity around the application of dilution levies and fees could smooth the introduction of hybrid funds in Ireland.

Interest has been strongest from established mutual funds, looking to find new distribution markets, using list classes to access exchange trading. Herein lies the challenge for Irish funds, and the CBI’s interpretation of the ESMA rules regarding naming convention. While ESMA have made clear listed sub funds must include ETF in the name, the guidance around share classes is open to interpretation.

In Luxembourg ETF share classes have been launched within existing SICAVs without changing the share class name, preserving the performance history of the fund. The CBI has taken a different stance, requiring a listed class to be named as an ETF. For an established fund, this may pose a barrier to adoption. Therefore, there may be merit for the Irish market considering the naming convention requirements for listed classes.