Ireland has updated its rules covering private funds to encourage more alternative investment managers to use the country as a base for their European operations.

The rules have been designed to appeal to private fund managers based in the UK which will lose their so-called “passporting” rights that allow them to sell investment products across the EU when the Brexit transition process concludes this month.

Ireland is already Europe’s second-largest fund centre with more than 560 international managers using the country as a domicile from where they can sell their products across Europe and Asia.

It faces competition as a fund domicile from Luxembourg which won significant new business from private managers in recent years when Ireland’s previous regulations were regarded as not fit for purpose. Private managers have established more than 2,000 Special Investment Partnerships in Luxembourg over the past six years.

Managers that establish Irish investment limited partnerships will be granted more flexibility when establishing private equity, private credit, venture capital, infrastructure, renewable energy and real estate funds under legislation which was approved this week in the Dáil, the Irish parliament.

The reforms are expected to create several thousand jobs and new income streams for service providers.

“This is game-changing in terms of Ireland’s global competitiveness,” said Pat Lardner, chief executive of Irish Funds. The association representing the fund industry in Ireland said it expected the modernised partnership structure to attract private capital worth up to €20bn a year and to create an additional 3,000 jobs in service centres based in Cork, Limerick, Wexford, Kilkenny and Galway.

More than 16,000 staff are directly employed in Ireland’s fund industry including portfolio managers, administrators, trustees, auditors, compliance, legal and tax advisers.

Mr Lardner said the new partnership structures would also help to facilitate long-term investments in renewable energy, energy efficiency, carbon capture and climate transition finance projects.

“It will help develop Ireland as a centre for green financing and align us with the EU’s policy goals in sustainable finance,” he said.

Under the updated rules, private fund managers will be permitted to create “umbrella” partnerships that allow them to run a range of strategies in sub-funds which should provide operational efficiencies and cost savings.

External investors will also be allowed to participate in functions, such as sitting on the board of a partnership, without giving up their limited-liability status which protects them from losing more than the capital they have committed.

The rules have also been amended to strengthen the interests of continuing investors in the event of a default by another investor in the partnership.

“Ireland will now be able to compete more effectively with other jurisdictions for private fund business,” said Mark White, head of the investment management group at McCann FitzGerald, a Dublin-based law firm.