ELTIF 2.0 Published - A revamp of the European long-term investment funds framework
On 7 March 2023, the European Council reached agreement on a revised regulatory framework for European long-term investment funds (ELTIF). The ELTIF regime seeks to increase the financing options for companies seeking long-term capital for projects concerning areas such as energy, transportation, social housing, schools, and hospitals. These funds hold significant importance in the Capital Markets Union, an initiative launched by the European Commission to promote employment and expansion in the European Union but had not been as successful as initially envisaged due to a number of shortcomings.
ELTIFs are the only type of funds dedicated to long-term investments which can be distributed on a cross-border basis to both professional and retail investors.
The ELTIF regime was introduced by EU Regulation 2015/760 dated 29 April 2015 on ELTIFs (the ELTIF Regulation), here. On 25 November 2021, the European Commission presented its Capital Markets Union package, here, which included the review of the ELTIF Regulation.
The amended version of the regulation aims to improve:
- Access to investments in third countries (subject to conditions)
- Increase attractiveness for investment by professional investors, by dis-applying diversification & concentration limits when targeting these investors only. Additionally increasing leverage limits to 100 per cent of the ELTIF’s capital from the previous 30 per cent limit
- Distribution to retail investors
- Provide some liquidity to investors
- The ability to set up master-feeder structures
Luxembourg has been one of the most active jurisdictions in which ELTIFs are being established. This has allowed both the investment fund industry and the Luxembourg regulator to build up particular expertise in the field of ELTIF. As the jurisdiction of choice, with 37 ELTIFs, which equates to a 54 per cent overall market share, the Luxembourg market offers deep insight in a number of aspects. The ELTIF Register can be found here.
On 15 March 2023, amendments to the ELTIF regime were published in the Official Journal of the European Union. They will enter into force on 9 April 2023 and apply from 10 January 2024. The amended regulation can be accessed here.
The European Council’s press release can be found here and the European Commission’s here.
Additional information on the Capital Markets Union can be found here.