Central Bank of Ireland delegation review: key considerations for Irish fund management companies

Theme

Supervisory expectations

Good practices identified

Areas requiring improvement

Governance

Fund Managers must maintain governance frameworks that are fit-for-purpose and ensure that risks are effectively managed. 

The board must not delegate functions to an extent that undermines its ability to manage the fund or exercise proper authority over decision-making.

Robust governance and control frameworks are critical to protecting investor interests.

Fund Managers have established frameworks with diverse, experienced boards and clear reporting lines.

Local committees provide regular challenge of delegate performance and escalate issues appropriately.

Fund Managers make effective use of group expertise and shared services whilst maintaining clear accountability for oversight.

Some boards lack sufficient independence due to influence from group / parent companies and directors serving beyond best-practice tenure limits.

Designated persons (DPs) are not always sufficiently senior or are performing too many roles.

There is over-reliance on group-level committees, which limits local challenge. 

Governance practices are often informal and lack documented policies, procedures and entity-specific risk statements.

Portfolio management

Fund Managers must have effective oversight and control frameworks in place for portfolio management activities. 

Due diligence must confirm that delegates meet all relevant EU, Irish legislative and local rule requirements. 

Managers must demonstrate active and documented decision-making responsibility for both delegated and retained portfolio management.

Some Fund Managers maintain robust oversight with regular delegate engagement, detailed performance analysis, comprehensive reporting and clear escalation pathways. 

Appropriate contingency planning exists for termination of portfolio management delegates. 

Where portfolio management is retained, Fund Managers demonstrate commensurate substance and resourcing.

Some Fund Managers have insufficient autonomy over oversight and decision-making for delegated portfolio management. 

Approaches are often unstructured and lack documented procedures, performance standards and regular monitoring. 

Limited attention is given to wind-down or transition procedures where a third-party portfolio manager cannot continue its mandate.

Risk management

Fund Managers must implement effective risk management frameworks that reflect their operating model and the complexity of their strategy, clearly distinguishing retained from delegated activities.

Appropriate verification of delegate outputs and documented decision-making must be retained, supported by timely and accurate data. 

Delegation of portfolio and risk management must be balanced so that overall delegation is not disproportionate.

Risk management is largely retained by Fund Managers, with generally well-established frameworks, independent oversight, risk limits and compliance monitoring. 

Fund Managers undertake independent verification of delegated risk activities via shadow or independent checks, real-time data access and pre-trade compliance controls.

Governance and risk management measures for delegated risk activities need strengthening to meet the Cross-Industry Guidance on Outsourcing expectations (CP138).

Risk management resourcing needs strengthening at some Fund Managers. 

Some Fund Managers are unable to demonstrate robust independent challenge or real-time data access, relying instead on delegate reporting.

Delegate oversight

Fund Managers must retain clear decision-making authority and control over delegated activities via a robust, documented oversight framework.

A consistent due diligence methodology must apply across all delegates, including sub-delegates, with defined objectives, triggers and an appropriate level of on-site engagement. 

Fund Managers should not rely solely on due diligence questionnaires or self-reporting by delegates.

Fund Managers adopt a risk-based approach to delegate due diligence, using due diligence questionnaires and RAG scoring to prioritise oversight resources.

Regular reporting, including against SLAs and KPIs, provides ongoing visibility of delegate performance, compliance and operational status. 

Fund Managers conduct targeted annual on-site visits across their delegate networks to assess capabilities, controls, systems and personnel.

Some Fund Managers rely on group processes for delegate due diligence rather than conducting their own direct assessment.

Local management is insufficiently represented at group-level committees considering delegation oversight. 

DPs and operational risk functions are insufficiently involved in delegate oversight, with some Fund Managers engaging group or seconded personnel for these functions.

Data capabilities

Fund Managers must have appropriate data delivery and data management practices to facilitate access to timely and accurate data. This supports effective decision-making and delegate oversight. 

Fund Managers should address gaps in strategy, integration, data governance and reporting effectiveness.

There is growing recognition of data as a strategic asset, with data improvement programmes in larger firms. 

Fund Managers increasingly rely on automated reporting and business intelligence tools to support timely management information.

Larger or more complex firms have formal data policies and dedicated data teams.

Data integration is often fragmented, with disparate systems for risk, investment, operations and compliance, resulting in manual reconciliation. 

Some Fund Managers engage delegates for pre / post-trade controls and investment and borrowing restriction monitoring, including instances of overriding internal risk limits. 

Some Fund Managers lack processes and contingency arrangements to manage potential data loss or interruption.