ELTIFs: a bright new idea to foster the European economy
As the European Union’s foremost cross-border investment fund jurisdiction with broad experience in both UCITS and Alternative Investment Funds, Luxembourg is well placed to become a centre of expertise for European Long Term Investment Funds.
“ELTIF is a great initiative for Europe and financing, notably in infrastructure. It is an opportunity for the larger public to participate in such financings as it is an opportunity for asset managers to manage such projects and to guide selected clients towards this type of investments. It is also an opportunity for Luxembourg to capitalise on its expertise and strong track record, to decisively contribute to Europe’s ambitions for sustained growth.” Freddy Brausch
“ We are convinced that the ELTIF Regulation creates an exciting new framework to channel private money into the real economy. There is a lot of interest from wealthy retail and mid/small-sized institutional investors for tangible and socially responsible investments such as infrastructure, schools or hospitals. In addition, the ELTIF provides a very interesting new framework for investments such as SME financing, including by way of loan origination. That is an exciting new feature which attracts a lot of interest in the market.” Silke Bernard
Introduction and Scope
Regulation (EU) 2015/760 of the European Parliament and of the Council of 29 April 2015 on European long-term investment funds (the “ELTIF Regulation”) was published in the Official Journal (OJ) of the European Union on 19 May 2015. Its aim is to create a new type of fund that will allow investors to invest into companies and projects that need long-term capital. Broadly, the ELTIF Regulation lays down uniform rules on the authorisation, investment policies, and operating conditions of ELTIFs. Only EU alternative investment funds (AIFs) will be eligible for authorisation as an ELTIF.
To qualify as an ELTIF a fund will have to:
- invest at least 70% in prescribed types of assets,
- strictly limit derivative and leverage use,
- be closed-ended,
- have an AIFMD authorised investment manager.
ELTIFs will be capable of being marketed to all types of European investors, including retail investors.
Legislative Process, Framework and Timing
The ELTIF Regulation came into force 20 days after publication in the OJ (8 June 2015) and applies from 9 December 2015. It is directly effective in EU member states, although some jurisdictions (notably Luxembourg) are also introducing national legislation.
ESMA is due to submit draft regulatory technical standards (RTS) relating to the ELTIF Regulation to the European Commission in the course of 2016.
The European Commission shall start reviewing the application of the ELTIF Regulation no later than 9 June 2019.