ELTIF 2.0 New Opportunities
The European Long-Term Investment Fund or so called «ELTIF» has been introduced in the European legislation pursuant to the Regulation EU (2015/760) issued by the European Parliament and European Council relating to the ELTIFs on 29 April 2019 (the “ELTIF Regulation”) to promote long term finance by raising and channelling capital toward long-term investments in the real economy in line with the European Union’s objective of smart, sustainable and inclusive growth.
Since the adoption of the ELTIF Regulation, only a few ELTIFs have been authorised, representing in 2021, an aggregate net asset value of EUR 2.4 billion euros. The relatively low success and attractiveness of ELTIFs are mainly due to its portfolio composition and restrictions as well as complexity to market to both professional and retails investors.
The new EU Regulation 2023/606 amending the ELTIF Regulation has been published on 20 March 2023 in the Official Journal of the European Union, launching the “ELTIF 2.0.” which has been designed to create new investment opportunities and to facilitate the attractivity of ELTIFs for asset managers by implementing, among others the following changes:
- broader scope of eligible assets & investments (allowing listed companies with a market capitalisation up to 1.5 billion euros, green bonds and FinTech companies) ;
- broader definition of “Real Assets” allowing for a flexible and broader range of qualifying investment strategies;
- possibility to set up a master-feeder structure or to adopt a fund of fund strategy ;
- more flexibility in the portfolio composition by allowing a larger portion of liquid assets and reducing the diversification requirements ;
- applying different investor protections between professional investors and retail investors by introducing specific rules (in terms of diversification, portfolio composition, borrowing limits, etc.)
- promoting the access to retail investors by lightening the assessment requirement and in particular waiving the EUR 10,000 initial minimum investment requirement and the 10% limit on aggregate investments ;
- facilitating the marketing to retail investors by waiving the requirement to set up local facilities in targeted countries.
ELTIF 2.0 will enter into force on 9 April 2023 and will become applicable on 10 January 2024, with the possibility for initiators of new projects to already opt in the ELTIF 2.0 regime when filing with the Luxembourg financial authority, the CSSF, which ELTIF 2.0 regime is also applicable to existing ELTIFs.
For more details on ETIF 2.0 Regulation, please use the link.