The European Long-term Investment fund (ELTIF) was introduced in 2015 as a collective investment framework. The fund aimed to regulate and promote investments in the EU for long-term capital projects. Almost 10 years later the EU considered it necessary to update this framework to satisfy the current market needs which led to the introduction of ELTIF 2.0
Some key features of the previous framework were
- Funds would only invest in certain unlisted companies needing long-term capital and 70% of the money in the fund must be in the assets.
- Only managers authorised under the AIFMD can offer ELTIFs, following strict rules on governance, depositaries, and transparency.
- ELTIFs typically lock funds for a set period, and early withdrawal options (if any) must be clearly explained to investors.
- If offered to retail investors, a clear Key Information Document (KID) is required, detailing risks like limited liquidity.
- Member States must comply directly with the regulation, ensuring proper oversight without adding extra rules (no “gold-plating”).
What has changed:
- The eligible assets are now only at 55% of Eltif’s net assets instead of 70%
- There is a larger variety of eligible companies such as financial fintech companies, green bonds and STS securitisations
- There is no minimum investment threshold
- There is now the ability to borrow up to 50% of the value of the ELTIF and in some cases up to 100%
- Requirements for sustainability assessments, advice to retail investors, the setting up of local facilities and the requests of winding down the ELTIF within a year are all removed.
ELTIFs are intended to boost non-bank financing options for businesses investing in the European Union’s real economy. Action at the European level is necessary due to the lack of consistency in funding vehicles across Member States, where such options are available. Moreover, it is not always clear whether these funds truly focus on long-term investments like infrastructure projects. Existing funds are often restricted to raising capital within a single Member State and are not recognized across borders, leading to fragmentation and hindering the growth of such funds.
At Christy’s our Investment Funds practice covers a wide range of alternative investment fund structures with a particular focus on private equity, real estate, infrastructure debt and hedge funds. We advise on all aspects of fund formation, including advice to determine the most appropriate structure that will best fit the investment strategy, investor base and requirements of the management team; the CySec authorisation process; AIFMD considerations, including those relating to operational requirements and marketing in the EU; regulatory capital requirements; and negotiating fund terms with investors.
