The European long-term investment funds (“ELTIF”) regime was introduced by EU Regulation 2015/760 dated 29 April 2015 on ELTIFs (the “ELTIF Regulation”). On 25 November 2021, the EU Commission presented its Capital Markets Union package, which included the review of the ELTIF Regulation.
It is generally acknowledged that the ELTIF Regulation has not been successful in achieving its objective to “boost European long-term investments in the real economy”[1], at least not on a large scale. Since its creation, only 68 ELTIFs[2] have been set up in the EU to date. However, there has been a significant increase in ELTIF launches, as the number of ELTIF stood at 28[3] on October 2020.
Luxembourg has been one of the most active jurisdictions in which ELTIFs are being set up. This has allowed both the investment fund industry and the Luxembourg supervisor to build up particular expertise in the field of ELTIF. As the jurisdiction of choice, with 37 ELTIFs, which equates to a 54% overall market share[4], the Luxembourg market offers deep insight in a number of aspects. ALFI has advocated to make the ELTIF more efficient and attractive for asset managers using the ELTIF label, for potential managers of ELTIFs, and for investors.
The EU Commission review of the ELTIF Regulation has been aimed primarily at increasing the uptake of the ELTIF product across the EU. The EU Commission has addressed in the redrafted ELTIF Regulation restrictive ELTIF fund rules on the one hand and barriers to entry for retail investors on the other. The Commission also distinguishes requirements for ELTIFs dedicated to retail and professional investors.
The main proposed changes focus in particular on
- Targeted changes to fund rules, by
- broadening the scope of eligible assets and investments;
- allowing for more flexible fund rules including fund-of-fund strategies;
- Reducing unjustified barriers preventing retail investors from accessing ELTIFs, by
- removing the minimum investment threshold;
- Removing the maximum 10% aggregate threshold requirements; and
- Aligning the suitability assessment with MiFID II rules; and on
- Easing selected fund rules for ELTIFs distributed solely to professional investors.
ALFI has welcomed the changes proposed by the EU Commission, which address most technical aspects that were raised by ALFI.
On 24 May 2022, the EU Council adopted its position on the reviewed ELTIF Regulation, whilst the EU Parliament continues to negotiate its proposed amendments with a view of adopting its position on the ELTIF Regulation before the summer 2022. In a last step the EU Council will enter into negotiations with the EU Parliament in order to agree on a final version of the text of the ELTIF Regulation, which is anticipated for Q3 2022.
While ALFI follows the legislative developments very closely, it continues its advocacy work and hopes that the agreements that will be reached will support the success of the ELTIF Regulation going forward.
[1] Recital 4 ELTIF Regulation.
[2] ESMA ELTIF Register as at 30 May 2022.
[3] https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12570-Long-Term-Investment-Funds-Review-of-EU-rules/public-consultation_en
[4]Market share by number of ELTIF, see ELTIF Register https://www.esma.europa.eu/document/register-authorised-european-long-term-investment-funds-eltifs
David Zackenfels, Senior Legal Adviser