knowledge 29 July 2026 |

Central Bank of Ireland Review of Delegation in the Irish Funds Sector: Actions for Fund Management Companies

Overall, the CBI found that FMCs using delegation models generally have strong governance frameworks, controls, oversight processes and data capabilities. These findings reflect the significant progress made by FMCs in meeting regulatory expectations, implementing the CBI’s Fund Management Companies – Guidance (FMC Guidance (commonly referred to as CP86), and adapting to a changing operating environment.

However, the report also identified areas requiring improvement in a number of FMCs, particularly in relation to board independence, reliance on group-level committees, resourcing, contingency planning and access to data.

Background

Delegation and outsourcing are core features of the European asset management operating model, enabling FMCs to access specialised expertise, global investment capabilities and operational efficiencies for the benefit of investors. Ireland is a leading European fund domicile, currently hosting 121 authorised FMCs operating under the UCITS and AIFMD regimes, both of which permit delegation of functions such as portfolio and risk management subject to defined conditions.

The review sought to assess whether individual FMC delegation frameworks meet supervisory expectations under the UCITS and AIFMD regimes, and the CBI’s FMC Guidance and its Cross Industry Guidance on Outsourcing (CP138), with FMCs retaining ultimate responsibility for delegated activities at all times.

Delegation Models

The review identified three principal FMC operating models:

• an FMC entity delegating portfolio management activities to group entities, while retaining risk management activities;
• a hybrid model, where the FMC utilises both group and third-party delegates to perform portfolio management, while retaining risk management activities; and
• a third-party model, where the FMC delegates portfolio management activities and certain risk management tasks to multiple third-party delegates.

Supervisory Expectations and Observations

The CBI’s expectations with respect to delegation models and observations of the FMCs reviewed are categorised across five themes: Governance, Portfolio Management, Risk Management, Delegate Oversight and Data Capabilities, as summarised below.

Theme	Supervisory Expectations	Positive Observations	Areas for Improvement
Governance	FMCs must maintain sound, fit for purpose governance frameworks and must ensure the fund is run in accordance with its strategy and that risks are effectively managed. FMC boards must ensure delegation does not undermine ability to manage the fund or exercise sufficient authority over decision-making.	FMCs evidenced established governance frameworks that consisted of diverse, experienced boards with clear reporting lines to oversee and challenge delegated activity. Local committees were also established to review and challenge delegated activities, with appropriate escalation. Group expertise and shared services were leveraged to strengthen delegate due diligence, on-site reviews and monitoring, with clear governance structures in place to define roles and ensure accountability.	For a small number of FMCs, board independence needs enhancement (group influence too high in some cases, with directors also serving beyond tenure limits) and there was some need for resource enhancements (e.g., where designated persons were not sufficiently senior or were carrying excessive responsibilities). In some cases, FMCs demonstrated an over-reliance on group-level committees, where local representatives had limited influence to independently challenge delegate decisions or performance issues. The CBI also observed some informal governance practices and a lack of documented policies and procedures, which heightens the risk of inconsistent decision making and inadequate oversight of delegates.
Portfolio Management	Ensure effective oversight and control frameworks are in place for portfolio management activities. Ensure that the delegate meets all relevant requirements set out in EU and Irish legislation, regulation and guidance. Support fully informed, timely decision-making and clearly evidence active decision-making responsibility for both delegated and retained portfolio management through documented governance processes.	FMCs demonstrated robust oversight with regular delegate engagement/reporting, detailed performance analysis, clear escalation pathways, and contingency planning to ensure continuity on delegate termination. For those FMCs retaining some or all portfolio management activities, they demonstrated commensurate levels of substance and resourcing for these activities.	The CBI observed in some cases a lack of autonomy with respect to oversight and delegated portfolio management decisions. Some FMCs lacked documented procedures, performance standards and regular monitoring. Explicit wind-down/transition procedures insufficiently developed in some instances.
Risk Management	Implement risk frameworks proportionate to operating model and investment strategy, clearly distinguishing retained and delegated activities. Retain sufficient verification of delegated outputs, supported by timely and accurate data; balance delegation of portfolio and risk management.	Where retained, risk management was established as a core function enabling FMCs to maintain independent oversight, set risk limits and monitor compliance. FMCs demonstrated independent verification (including shadow checks) of delegated risk activities to validate delegate outputs, using real-time data access and pre-trade compliance checks.	In some FMCs, governance and resourcing required strengthening where risk management was delegated (per CP138). In some FMCs, there was a lack of robust independent challenge or access to real-time data, instead relying on delegate reporting.
Delegate Oversight	Retain clear decision-making authority and control over delegated activities. Apply a consistent due diligence methodology, including for sub-delegates, with an appropriate level of on-site engagement. Oversight should be formal and accountable and should not be based purely on delegate self-reporting or standard due diligence questionnaires.	The CBI observed risk-based due diligence using Due Diligence Questionnaires and RAG scoring, regular SLA/KPI reporting, and targeted annual on-site visits across delegate networks.	There were instances of FMC reliance on group processes rather than their own direct assessment with limited designated person involvement and local representation on group oversight committees.
Data Capabilities	Ensure data delivery and management practices support timely, accurate decision-making. Address gaps in strategy, integration, data governance and data reporting effectiveness.	The CBI observed growing use of data as a strategic asset, with data improvement programmes in larger firms and rising use of automated reporting and business intelligence tools supporting timely management information and compliance dashboards. Larger FMCs have formal data policies and dedicated data teams/resources focused on accessibility, reliability and quality.	In some FMCs, a fragmented approach to data integration across disparate risk, investment, operations and compliance systems resulted in manual reconciliation.  Some FMCs delegated pre-/post-trade controls and investment/borrowing restriction monitoring, including instances where internal risk limits were overridden. FMCs had not yet established contingency arrangements for data loss or interruption in some cases.

CBI Next Steps

The CBI has already commenced supervisory engagement with FMCs where shortcomings were identified, and a small number are now subject to time-bound risk mitigation programmes. In parallel, the CBI will review governance arrangements for FMCs this year, including enhancements to the current framework with respect to delegation. The review may focus on simplifying the FMC Guidance, reinforcing the PCF framework for FMCs, enhancing governance requirements and considering how the CBI might proportionately apply the IAF/SEAR framework to the funds sector.

Action Required by FMCs

FMCs are expected to assess the CBI delegation feedback report against their own delegation model, with input from the FMC board, and put in place a time-bound plan by the end of 2026 to close any gaps in operational, resourcing and governance arrangements.