On 25 November 2021, the European Commission published a proposal for a Regulation amending the Regulation on European long-term investment funds (ELTIFs).
The changes relate to the scope of eligible assets and investments, the portfolio composition and diversification requirements, the borrowing of cash and other fund rules and as regards requirements pertaining to the authorisation, investment policies and operating conditions of ELTIFs.
Since the adoption of the Regulation on ELTIFs in 2015, few ELTIFs have been authorised. The available market data indicates that the development of the ELTIF segment has not scaled up as expected, despite the EU’s focus on promoting long-term finance in the Union.
To make the ELTIF framework more appealing, the proposal makes targeted changes to the fund rules. In particular, broadening the scope of eligible assets and investments, allowing more flexible fund rules that include the facilitation of fund of fund strategies, and reducing the unjustified barriers preventing retail investors from accessing ELTIFs, in particular the EUR 10,000 initial investment requirement and the maximum 10% aggregate threshold requirement for those retail investors whose financial portfolios are below EUR 500,000. The proposal also seeks to make the ELTIF structure more attractive by easing selected fund rules for ELTIFs distributed solely to professional investors. It also introduces an optional liquidity window mechanism to provide extra liquidity to ELTIF investors and newly subscribing investors without requiring a drawdown from the capital of ELTIFs.
A detailed explanation of the proposed changes can be found on pages 7 to 12 of the proposal.
The Regulation, when finalised, will enter into force on the twentieth day following its publication in the Official Journal of the European Journal and shall apply six months afterwards.