Funds

Proposed ELTIF Regulation – One Step FurtherThe Council of the EU has agreed its position on the European Commission’s proposal for a Regulation on European Long-term Investment Funds (ELTIFs).

The intention behind the proposal is to increase the pool of capital available for long-term investment in infrastructure, transport and sustainable energy projects. Only EU alternative investment funds are eligible to market themselves as ELTIFs. ELTIFs will be subject to rules requiring them to invest at least 70% of their capital in clearly-defined categories of eligible assets. Trading in assets other than long-term investments will only be permitted up to a maximum of 30 % of their capital.

ELTIFs will target both professional and retail investors in the EU. The draft Regulation lays down rules to protect investors, in particular retail investors. It requires the ELTIF manager or any distributor to ensure that a retail investor with a portfolio of up to €500,000 doesn't invest an aggregate amount exceeding 10% of his portfolio in ELTIFs, provided that the amount invested in a single ELTIF is not less than €10,000.

In addition, where the lifecycle of an ELTIF that is offered or placed to retail investors exceeds ten years, the ELTIF manager or distributor is required to issue a clear written alert that this product may not be suitable for those retail investors unable to sustain such a long term and illiquid commitment.

Next steps

Now that the Council of the EU has reached general agreement on the proposal, trilogue negotiations can begin amongst the Parliament, the Council and the Commission once the new Parliament is in place following the recent elections. The proposal will then have to be formally adopted by both the Parliament and the Council under the ordinary legislative procedure.

Contributed by Orla McKnight of William Fry.