The European Parliament and Council hope that the Regulation will encourage, or at least facilitate, long-term retail and professional investors to invest in infrastructure projects, and that this will help to stimulate economic growth across Europe.
European Long-term Investment Funds (ELTIFs) will invest at least 70% of their assets in, for example:
- Non-listed undertakings that issue equity;
- Debt instruments for which there is no readily identifiable buyer;
- Real assets that require significant up-front capital expenditure;
- SMEs admitted to trading on a regulated market or on a multilateral trading facility.
Only European alternative investment funds (AIFs) that are managed by alternative investment fund managers (AIFMs), authorised in accordance with the AIFMD will be eligible to market themselves as ELTIFs.
ELTIFs will not generally offer redemption rights before their end of fixed-term life.
The Regulation includes rules to protect investors. In particular, the AIFM or distributor will be required to:
- Ensure that retail investors with a portfolio of less than €500 000 do not invest more than 10% of that portfolio in ELTIFs; and
- (If the ELTIF will run for more than 10 years), issue a written warning that it may not be suitable for retail investors that are unable to sustain such a long-term and illiquid commitment.
The Regulation will come into force on the 20th day after it’s been published in the Official Journal of the European Union; and it will be directly applicable in every country in the Union 6 months after that.
OJ publication imminent. We are preparing a detailed Client Alert, for publication on Cooley.com after that.