Update your browser to see this website correctly.
On 15th February 2023, the European Parliament voted in favour of the much anticipated update to the ELTIF regulation (European Long-term Investment Funds), with the Council of the EU following suit on 7th March. First passed in 2015, its aim was to increase accessibility to long-term assets such as infrastructure and unlisted companies by broadening the marketing audience across the EU, under a marketing passport, to include retail investors. Despite being favourably received by the industry in principle, it failed to achieve widespread adoption. As of January 2023, the ESMA ELTIF register refers to only 84 ELTIFs, compared to the RAIF regulation (Reserved Alternative Investment Fund) set up in 2016 which has seen far greater popularity. These reforms have been long-awaited to boost uptake of this fund structure and help drive the democratisation of private assets.
The Update, by Dr Stefan Staedter, Partner at Arendt & Medernach SA
For the investment universe, the ELTIF 2.0 will:
On the distribution side:
ELTIF 2.0 will align the ELTIF suitability test with the MiFID II suitability test. The suitability test will need to be carried out irrespective if the shares/units are acquired by a distributor as an initial subscription or via a secondary market. In case the distributor considers the ELTIF not to be suitable for the retail investor, the retail investor’s consent may grant an equivalent access to the ELTIF.
It will likewise remove the minimum investment of EUR 10,000.- and the 10% exposure cap for retail investors whose financial portfolios are below EUR 500,000.-. Both amendments are very welcome by the distributors as they have been true barriers for the democratisation of private assets.
Finally, ELTIF 2.0 will simplify the access to an ELTIF for senior staff, a member of the portfolio manager, director, officer or an agent or employee of the AIFM or an affiliate of the AIFM of the ELTIF. To the extent that these persons have sufficient knowledge about the ELTIF, they do not need to be subject to a suitability test in order to be allowed to invest in the ELTIF.
As a result of this update, the below benefits can be expected:
Some remaining challenges include:
The Goji point of view
Goji has seen wider interest in the ELTIF 2.0 as the scope of eligible assets and investments has increased. The product is now more attractive and flexible, not only for retail investors, but also for professional investors. Goji is already supporting asset managers in the distribution of their ELTIF products to EU private banks, and expects to see continued growth for the ELTIF 2.0 in the coming months.
Want to learn more? Get in touch to discuss how Goji can support you launching an ELTIF 2.0.