The European Council has set out its position on improving the European long-term investment funds (Eltifs) regulation.
The council said that the updated regulation will make the investment funds more attractive to asset managers and investors, while growing the number of Eltifs in Europe. These funds, said the council, are important in financing and influencing the green and digital transitions.
In its position, the council underlined three priorities:
- Channel more financing to SMEs and long-term projects, including by removing existing constraints on the portfolio composition of Eltifs, especially for those distributed solely to professional investors;
- Enhance the role of retail investors by making Eltifs more attractive to them, and by lifting the barriers to entry which did not take into account the profile and objectives of each investor;
- Maintain high investor protection standards and provide retail investors with all the relevant information so that they can take informed decisions.
The review, said the council, is expected to unlock untapped potential to mobilise capital for the financing of long-term projects by making the creation of such funds more attractive for asset managers, while making it easier for retail investors to put money into Eltifs.
It plans to achieve the first of those two goals through updating the scope of eligible assets and investments, the portfolio composition and diversification requirements, the borrowing of cash and other fund rules, the requirements pertaining to the authorisation, and the investment policies and operating conditions of Eltifs.
To achieve the second, it will remove the minimum €10,000 investment threshold, while ensuring strong investor protection.
According to Invest Europe, ELTIFs first came into force seven years ago, through a European product framework for both professional and retail investors looking for long-term assets into which to place their money.
To qualify as an Eltif, Invest Europe says that a fund must first be an alternative investment fund and then meet certain other conditions. Eligible investments include debt and equity instruments in all unlisted companies, as well as real assets such as infrastructure.