Long-term investment funds

ELTIFs

The ELTIF Regulation came into force in 2015 and created a new European product framework for both professional and retail investors looking to invest in long-term assets. To qualify as an ELTIF, 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. 

A review of the ELTIF framework was introduced on 25th November 2021, introducing important changes to the framework at the request of the industry:

• Broadening of eligible assets and of eligible investors
• Amendments making it easier for ELTIF Fund-of-funds to be set up
• Eased diversification and concentration requirements (and removal of some of these requirements for professional-only ELTIFs)
• Increased borrowing limits (and exclusion of borrowings backed by uncalled commitments from the calculation)
• New rules on conflicts of interest favorable to co-investments
• New redemption facilities at managers’ discretion

How does it affect private equity?

The Regulation provides opportunities for private equity managers to establish a new product under the ELTIF label. While this involves complying with both the AIFMD and the ELTIF Regulation, it may be attractive for some AIFMs to use the strength of the ELTIF brand to attract a wider pool of backers, particularly retail investors.