The European Commission has finalised its reform of the European Long-Term Investment Funds (ELTIFs) rules with the publication of the Commission Delegated Regulation specifying regulatory technical standards (RTS) on 25 October. ELTIFs are EU funds that enable investors to invest in real assets, companies and long-term projects. The revision brings improvements for EU investors and strengthens EU capital markets. It was part of the revamped 2021 capital markets union action plan that aimed at unlocking long-term investments in the green and digital transition and driving sustainable growth across the EU.
The revised regime, commonly referred to as ELTIF 2.0 and applicable since January 2024, makes ELTIFs more accessible and attractive for investors. It removes existing hurdles and enables ELTIFs to be marketed to investors across the EU. ELTIF 2.0 also democratises private investing by empowering retail investors and opening the door to assets classes, projects and investment strategies previously reserved primarily for highly sophisticated institutional investors. Moreover, the new regime enhances investor protection safeguards by introducing a suitability assessment aligned with general rules under the Markets in Financial Instruments Directive (MiFID II), a depositary for retail ELTIFs as well as comprehensive disclosure requirements and investor alerts.
Some of the features of ELTIF 2.0
- Expanded investment universe: The reform significantly broadens the range of eligible assets for ELTIFs, encompassing infrastructure, investments in SMEs, listed and unlisted companies, European innovative enterprises and long-term projects. The flexibility of the ELTIF 2.0 allows fund managers to tailor their investment strategies, liquidity and exposures to a wider range of investment opportunities.
- Enhanced liquidity options: Recognising the need for greater liquidity, ELTIF 2.0 allows for the creation of semi-liquid ELTIFs that can, under certain conditions, offer redemptions in line with the fund’s liquidity situation. In addition, it introduces a mechanism to promote the secondary trading between existing and potential investors. This provides investors with additional possibilities for accessing liquidity.
- Simplified marketing and distribution: The EU-wide passportability of ELTIF 2.0 streamlines the marketing for retail investors, ensuring they have access to clear and concise information, including a Key information document (KID), to make informed investment decisions. This also significantly facilitates marketing processes for asset managers and distributors.
The finalisation of the ELTIF 2.0 reform is expected to stimulate long-term investments in Europe. It marks a turning point for many national investment funds, which are mostly marketed domestically, and therefore are unable to fully reap the benefits of the Single Market. By addressing the shortcomings of the original ELTIF framework, ELTIF 2.0 seeks to mobilise significant private capital, strengthen the EU's capital markets and support projects crucial to the EU's long-term competitiveness. In this way, it will act as a powerful catalyst for advancing the savings and investments union and capital market union objectives.
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Details
- Publication date
- 30 October 2024
- Author
- Directorate-General for Financial Stability, Financial Services and Capital Markets Union