However, European supervisors’ proposed technical standards threaten the success of the new regime
On 10 January 2024, the new European Long-Term Investment Fund (ELTIF) Regulation became applicable. Going forward, fund managers will have greater flexibility to make ELTIFs more attractive to end investors, particularly on the retail side, unlocking their potential as a source of financing for the European real economy. To support the success of ‘ELTIF 2.0’, EFAMA and Arendt have published a ‘Frequently Asked Questions’ brochure, which covers the most burning questions asset managers may have regarding the new regime.
Questions covered include:
What is an ELTIF, what role could they play in the European economy and what are the basic fund rules
What assets ELTIFs can invest in, portfolio composition requirements, possible fund structures, what is prohibited
Who can invest in ELTIFs and what are the specific requirements for retail investors
What are the operating requirements, including redemptions and leverage
How can ELTIFs be marketed and distributed
What you need to know about authorisation and registration
What role will Member States play, including tax treatment
The FAQ also includes the timeline so far and next steps.
The new rules have generated much interest from asset managers, which we hope will be supported and not hindered by technical rules which are awaiting finalisation. In December last year, ESMA proposed draft Regulatory Technical Standards (RTS) which specify detailed rules on a number of key elements like redemption policies. Requiring ELTIFs to choose between excessive notice periods or very high allocations to UCITS-eligible assets is not in the spirit of ELTIF 2.0 and risks alienating potential investors. Prudent liquidity management requires a more comprehensive set of parameters, aligned with existing liquidity stress testing practices and as reflected in the Financial Stability Board’s revised recommendations on open-ended funds. We therefore urge the European Commission, who is currently assessing the RTS, to reconsider some of the more harmful proposals to ensure the future success of the ELTIF product.
Tanguy van de Werve, Director General at EFAMA, commented: “The new regime is a great achievement which allows ELTIFs to become a key additional source of financing for the European real economy. We hope that this FAQ contributes to the future success of ELTIF 2.0. It will be critical that the accompanying technical standards follow the spirit of the ELTIF Regulation and align with wider trends and best practices in liquidity management. With the correct regulatory parameters in place, ELTIF could significantly contribute to the sustainable transition through alternative, long-term investments, to the benefit of the European economy.”
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Notes to Editors
Request access to the ELTIF FAQ publication here.
Find out more about our work on ELTIF here.
For further information, please contact:
Head of communications and membership development