On 19 October 2022, the negotiators from the Council and the European Parliament reached a provisional agreement on a revision of the European Long-Term Investment Fund (ELTIF) Regulation. The changes are intended to make the framework more attractive to asset managers and especially retail investors for a fund framework that has hitherto struggled to gain traction.

On 25 November, 2021, the EU Commission presented its Capital Markets Union package, including the proposal to amend Regulation (EU) 2015/760 of 29 April 2015 on European long-term investment funds (the “Proposal”). The Council adopted its position on the Proposal on 24 May 2022. Negotiations with the European Parliament to reach an agreement on a final version of the text started on 14 September 2022 and resulted in the provisional agreement of 19 October 2022.

The purpose of the Council and the European Parliament is to make ELTIFs more attractive and to facilitate investment in these funds. One of the Council’s key priorities is now reflected in the text, namely an overhaul of the ELTIF framework that will allow channelling more funding to small and medium-sized enterprises (the “SMEs”) and long-term projects to help achieve the digital transition. The SMEs represent 99% of all businesses in the EU. Moreover, ELTIFs can help with financing the ecological transition, among others. Thus, ELTIFs can be an important means of financing long-term projects such as transport infrastructure, sustainable energy production or distribution.

The co-legislators intend to overcome several supply and demand side limitations, such as the constraints to the distribution process and the strict investment rules. Among other things, they have clarified the definition of eligible assets and investments, portfolio composition and diversification requirements, conditions for borrowing and lending liquidity and other rules for funds, including sustainability aspects. The Proposal also includes rules to make it easier for retail investors to invest in ELTIFs while ensuring strong investor protection.

Please free to contact our Investment Management team about any questions, pieces of advice or issues relating to ELTIFs and the future ELTIF regime.