EUROPE: Is ELTIF 2.0 a more viable structure for long-term investment in the EU?
Version 1 of the European Long-Term Investment Fund (ELTIF) has not been a huge success story with only a few relatively small funds launched to date. However the development of a well-supported fund structure for retail investors to invest in illiquid long-term assets remains a key priority for EU legislators.
Seeking to address this, the EU Parliament adopted certain liberalising amendments to the ELTIF Regulation on 15 February 2023.
One key change is that the spectrum of eligible assets has been broadened to include mortgage-backed securities, commercial, residential, and corporate loans, as well as trade receivables. Real assets will no longer need to be valued at EUR 10 million or more. Limits regarding diversification, concentration, and the required minimum level of eligible assets, have also been made less restrictive.
The retail investor restrictions and suitability assessment requirements will also be eased. In particular, the requirement for a minimum investment of EUR 10,000, and the investor portfolio limitation (the ELTIF must not exceed 10 per cent. of an investor’s portfolio), for retail investors with a financial instrument portfolio of less than EUR 500,000 have been lifted. In addition, the ELTIF manager or distributor is no longer obliged to provide investment advice to retail investors.
If, as expected, the amended ELTIF regulation is published this month, it will enter into application around the beginning of 2024.