The Central Bank of Ireland has published its findings and expectations following a review of delegation in the Irish funds sector.
Overview
Delegation is a subject of ongoing supervisory focus at both EU and domestic level. Increased reporting relating to delegation arrangements is due to apply from April 2027 for both UCITS and alternative investment funds (“AIFs”) under the revised Alternative Investment Fund Managers Directive (“AIFMD 2.0”). Under the EU’s Market Integration and Supervision Package (“MISP”), the European Commission has proposed that arrangements where management companies / AIFMs rely on EU group entities to perform functions do not qualify as delegation and are not therefore subject to delegation requirements.
Reflecting this ongoing focus at EU level, the Central Bank of Ireland (“Central Bank“) launched a review of delegation practices in 2025 within the Irish funds sector, examining fund management companies (“FMCs“) authorised in Ireland, with a particular focus on governance, oversight arrangements and the effectiveness of control frameworks in managing delegated activities. The review forms part of the Central Bank’s ongoing supervisory engagement with the sector and builds on its earlier thematic work on the effectiveness of FMCs and their operational frameworks. On 23 July 2026, the Central Bank published its feedback report setting out its findings and expectations.
The review encompassed a desk-based review of approximately 40 FMCs covering around 4,600 investment funds, together with on-site inspections of 21 FMCs providing coverage of 40% of assets under management across approximately 3,000 investment funds.
Overall finding: broadly positive
The report acknowledges the important role of delegation in supporting the optimal functioning of European capital markets and in enabling firms to access specialised expertise, global investment capabilities and operational efficiencies.
The review found that, in general, FMCs operating a delegation model have good governance frameworks, controls, oversight processes and data capabilities in place, reflecting important progress made in recent years, including in the implementation of the Central Bank’s Fund Management Companies Guidance.
The thematic review found that FMCs are in compliance with regulatory requirements and largely meet supervisory expectations. However, a small number of FMCs fell materially short of supervisory expectations and are now subject to appropriate, time-bound risk mitigation programmes to remediate identified deficiencies. The review identified a number of FMCs which require certain elements of their governance arrangements and operating models to be improved, listing board independence, over-reliance on group level committees, resourcing concerns, lack of contingency planning and limitations with data access as areas for enhancement.
Key themes and findings
| Theme | Key findings | Expectations |
| Governance | Quality of governance arrangements was good across the sector, with appropriately diverse boards demonstrating appropriate levels of oversight and challenge.
Areas requiring improvement include:
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| Portfolio management | Where portfolio management activities are delegated, oversight was robust and generally well executed, with firms implementing structured monitoring, comprehensive reporting and clear escalation pathways.
Weaknesses identified included:
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| Risk management | Risk management activity is largely retained by FMCs, with frameworks generally well-established and underpinned by clear policies and procedures. FMCs demonstrated independent verification of delegated risk activities, including shadow checks with real-time data access and pre-trade compliance controls.
Weaknesses identified included:
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| Delegate oversight | Delegate oversight frameworks were in place across the sector, with FMCs demonstrating effective delegate accountability, compliance and performance management supported by clear monitoring procedures and regular performance assessment.
Weaknesses identified included:
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| Data capabilities | For the most part, FMCs recognised the importance of robust data management practices supported by clear governance frameworks and quality standards. An increasing awareness and use of data as a strategic asset was observed, with reliance on automated reporting and business intelligence tools rising.
Weaknesses identified included:
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Action required
All FMCs are expected to consider the contents of the report with input from the FMC board, conduct a gap analysis against the supervisory expectations set out therein, and put in place a time-bound plan by year end to address any deficiencies identified in their operational, resourcing and governance arrangements in respect of delegation.
Upcoming regulatory developments
The Central Bank has announced that it will engage in a review of governance arrangements for FMCs this year, including enhancements to the current framework as regards delegation, taking account of the changing nature, scale and complexity of the sector, the risk environment and the findings from the Central Bank’s supervisory work. Areas in scope include simplifying existing guidance, reinforcing the pre-approval controlled function (“PCF”) framework for FMCs, enhancing governance requirements, and considering the proportionate application of the Individual Accountability Framework (“IAF“) / Senior Executive Accountability Regime (“SEAR“) to the funds sector.
Comment
It is positive to see regulators recognising the important role of delegation in enhancing investor outcomes by allowing FMCs to leverage experienced portfolio managers and service providers across jurisdictions, facilitating diversified investment opportunities and efficient capital allocation. Robust governance and oversight arrangements are clearly critical in ensuring the ongoing effectiveness and positive role of delegation in supporting the optimal functioning of EU capital markets.
Contact us
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