European Commission Proposal on European Long-term Investment Funds
On 26 June 2013 the European Commission has put forward its proposal on European Long-term Investment Funds (ELTIF). This proposal forms part of the Commission’s Single Market Act II communication published in October 2012 and can also be seen as a first follow up to its Green Paper on Long -Term Financing of the European Economy.
Under the Proposal, the establishment of ELTIFs will provide a channel of financing of long term investments such as infrastructure investments and non-listed companies (SMEs) by institutional and private investors. The objective of the Commission is to contribute to long-term economic growth through investments into illiquid assets by an improved and regulated marketing and selling of specifically designed funds.
Key aspects of the proposal
- The European Commission has proposed the legislation in the form of a Regulation, directly applicable to all Member States
- An authorisation as an ELTIF will be applicable throughout the Union
- The rules of the regulation are exhaustive so national gold-plating is not allowed
- Managers of ELTIFs need to be authorised as an AIFM
- Redemption of ELTIFs is limited due to the long term investment characteristics. However, trading of ELTIFs on the secondary market is explicitly intended
- ELTIFs can be marketed to retail and professional investors, this entails that there are product requirements included in the regulation similar to UCITS (diversification requirements, concentration limits, information on costs, prospectus, KID) and facilities in the Member States where the ELTIF is marketed are required (to be determined in lower legislation)
- ELTIFs are authorised by the competent authority of the Member State of the fund. ESMA will hold a register of all authorised ELTIFs.