European Council (EC) negotiators and the European Parliament have reached a provisional agreement on the review of the regulation on European long-term investment funds (Eltif) to make these investment funds more attractive.
The Eltif regulatory framework put forward by the governmental bodies sets out detailed fund rules on eligible assets and investments, diversification and portfolio composition, leverage limits, and marketing.
A statement from the EC said: “Eltifs are the only type of funds dedicated to long-term investments that can be distributed on a cross-border basis to both professional and retail investors. However, since the adoption of the regulation in 2015 only a few Eltifs have been launched due to significant constraints in the distribution process (demand-side) and stringent rules on portfolio composition (supply-side). The Eltif industry is relatively small and concentrated in a handful of member states. There is an untapped potential to channel more capital towards long-term projects.”
The EC and the European Parliament said that they intend to overcome several supply-side and demand-side limitations. They clarified the scope of eligible assets and investments, the portfolio composition and diversification requirements, the conditions for borrowing and lending of cash and other fund rules, including sustainability aspects. The package also includes rules to make it easier for retail investors to invest in Eltifs while ensuring strong investor protection. Following technical and legal revision, the finalised text will be submitted for the adoption by the Council and the European Parliament.
The Commission presented its Capital Markets Union package including the Eltif proposal on 25 November 2021. The Council adopted its position on the proposal on 24 May 2022. Negotiations with the European Parliament in order to agree on a final version of the text started on 14 September and ended in the provisional agreement reached today.