On 22 April 2024, the European Securities and Markets Authority (ESMA) published its opinion on the regulatory technical standards (RTS) under the revised European Long Term Investment Fund (ELTIF) Regulation. The revised ELTIF Regulation provides that ESMA shall develop draft RTS to determine in particular the following:

  • The circumstances in which the life of an ELTIF is considered compatible with the life-cycles of each of the individual assets, as well as different features of the redemption policy of the ELTIF.
  • The costs disclosure.

On 19 December 2023, ESMA published its final report on the draft RTS under the revised ELTIF Regulation and submitted it to the European Commission (Commission) for adoption. On 26 March 2024, the Commission issued a Communication on the intention to adopt, with amendments, the draft RTS under the revised ELTIF Regulation. The main reasons for the amendments were summarised in a draft letter to ESMA’s chair which was set out in an Annex to the Communication. In particular, the Commission’s analysis of the draft RTS was that “ESMA’s draft RTS do not sufficiently cater for the individual characteristics of different ELTIFs” and that “… it is necessary to take a more proportionate approach to the drafting of the RTS, in particular with regard to the calibration of the requirements relating to redemptions and liquidity management tools”.

In this opinion, ESMA suggests only a limited number of changes to the amendments proposed by the Commission. ESMA acknowledges that an appropriate balance should be found between, on the one hand, the protection of retail investors and financial stability related objectives, and on the other hand, the fact that ELTIFs should make an important contribution to the Capital Market Union objectives. However, in view of the Commission’s comments, ESMA proposes striking that balance slightly differently from the Commission. The Appendix to the opinion includes the draft RTS. The proposed changes by ESMA are shown in tracked-changes highlighted in yellow, while all the other tracked-changes are the changes proposed by the Commission.

Next steps

The Commission may adopt the draft RTS with the amendments it considers relevant or reject it. The European Parliament and the Council of the EU may object to RTS adopted by the Commission within a period of three months.