ELTIF 2.0 ' Publication In Official EU Journal

• Jurisdiction: European Union
• Law Firm: Bonn & Schmitt
• Subject Matter: Finance and Banking, Corporate/Commercial Law, M&A/Private Equity, Fund Management/ REITs, Corporate and Company Law
• Author: Dr. Marcel Bartnik
• Published date: 29 March 2023

The revised regulation on the European Long Term Investment Fund (ELTIF) was published in the Official Journal of the EU today and will in principle apply from 10 January 2024, although an earlier use of the new regime is possible. The changes include among others more flexible investment rules, the removal of certain restrictive thresholds and minimum investment amounts, all of which is expected to make the ELTIF substantially more attractive as a vehicle for retail investors interested in alternative assets.

What is the ELTIF ?

The initial version of the ELTIF was established by way of a European Regulation back in 2015. It was intended to be a mixture of the UCITS product regime and the AIFMD manager regime, allowing retail investors access to asset classes such as private equity, real estate or debt based on a passport regime throughout the EU and by way of a fund regime that required a prior authorisation by the national regulator. However, it proved to be a complete failure, with only a minimal number of ELTIFs established and a negligible market share. The new revised regime intends to remedy the causes for such failure.

What makes ELTIF 2.0 more attractive than the initial regime ?

The new regulation addresses the main shortcomings of the initial regime, such as for example :

• Fund-of-fund investments into certain AIFs are now possible, as well as investments into securitisations and green bonds
• Co-investments are allowed
• Investments outside the EU are far more easily permitted
• Minimum threshold for real estate strategies removed
• Capitalisation limit for investment into listed companies increased to 1.5bn EUR
• Portfolio and risk diversification rules have been substantially softened and made more flexible
• Minimum investment amount removed (including 10% exposure limit)
• Simplified redemption regime
• Alignment with MiFID II suitability test will make distribution simpler

For which...