Unlocking the potential of the ELTIF

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To realise the full potential of the ELTIF regime, the EU Commission is proposing enhancements to the ELTIF legal framework to make it more attractive to investors. These targeted amendments would strengthen the ELTIF’s role as a complementary source of finance to the real economy.

Earlier today, the EU Commission published a legislative proposal containing targeted amendments to the ELTIF Regulation. The amendments aim to increase the uptake of ELTIFs across the EU for the benefit of the European economy and investors. The EU Commission is thus proposing a legislative framework that better channels the long-term savings of retail investors into long-term investments and facilitates investments by professional investors. This, in turn, will support the continued development of the Capital Markets Union (CMU), which also aims to facilitate EU companies’ access to more stable, sustainable and diverse long-term financing. The legislative proposal published today forms part of a unified package of four proposals prepared by the EU Commission as part of its CMU 2.0 Action Plan.

Key amendments

The proposed amendments to the ELTIF legal framework aim to accelerate the acceptance of ELTIFs as a ‘go-to’ fund structure for long-term investments. To render this framework more appealing, the following key amendments have been proposed:

In addition to the key amendments above, the proposed text foresees further amendments; for example concerning increased thresholds under the diversification rules, borrowing limits, and redemption mechanisms.

Stimulating the ELTIF

Once adopted, the amendments to the ELTIF legal framework as proposed today by the EU Commission will certainly grant ELTIF managers more flexibility, thereby increasing the attractiveness of the ELTIF label. As such, they are a welcome set of rules that will further boost the recent uptake of the ELTIF.

Since the the original ELTIF legal framework was adopted in April 2015, 57 ELTIFs (as of October 2021) have been launched with approximately EUR 2.4 billion in assets under management. These authorised ELTIFs are domiciled in only four Member States: Luxembourg (26 ELTIFs), France (16 ELTIFs), Italy (13 ELTIFs) and Spain (2 ELTIFs).

The EU Commission’s proposal forms part of its CMU 2.0 Action Plan, published in September 2019. It follows a report by the CMU High Level Forum, published in June 2020, that stated that a review of the ELTIF regulatory framework with targeted amendments could accelerate the uptake by investors with a long-term investment horizon and increase the flow of long-term financing to the real economy. In October 2020, the EU Commission launched a public consultation that gave all stakeholders an opportunity to voice their views on the risks and opportunities presented by the review of the ELTIF framework and the need for action.

Next steps

Today’s publication of the legislative proposal has kicked off the legislative process. The EU Commission’s proposal is now under review by the EU Parliament and the Council of the EU. The text in its current version states that once adopted by the EU co-legislators, the amendments to the ELTIF Regulation will become applicable 6 months after their publication in the Official Journal of the EU.

For further information, please reach out to your usual contact within the Fund Formation Group.

To access the EU Commission’s legislative proposal for amendments to the ELTIF Regulation, click here_

Download the press release

Luxembourg Newsflash – Promoting long-term investment for retail investors – targeted revision of the EU Regulation on the ELTIF

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