European Parliament and Council reached a provisional agreement on European long-term investment funds
On 19 October 2022, the EU Council announced that the European Parliament and Council reached a provisional agreement to review the framework governing European long-term investment funds (ELTIF). The aim is to overcome a number of supply-side and demand-side limitations. The changes will hopefully channel more financing to small and medium-sized enterprises (SMEs) and long-term projects which will help achieve the digital transition.
The ELTIF regulatory framework sets out detailed fund rules on eligible assets and investments, diversification and portfolio composition, leverage limits and marketing. ELTIFs are the only type of funds dedicated to long-term investments that can be distributed on a cross-border basis to both professional and retail investors. This industry is relatively small and concentrated in some of the member states.
EFTIFs can be an important vehicle for channelling financing to SMEs, as well as long-term projects such as transport and social infrastructure, sustainable energy generation or distribution.
The co-legislators, aim to amend and review, the scope of eligible assets and investments, the portfolio composition and diversification requirements, the conditions for borrowing and lending of cash and other fund rules, including sustainability aspects. The package also includes rules to make it easier for retail investors to invest in ELTIFs while ensuring strong investor protection.
The EU Council’s press release can be found here.