On 26th June 2013 the European Commission transmitted to the Council its proposal for a Regulation of the European Parliament and of the Council on European Long-term Investment Funds (“ELTIFs”), a new investment fund framework designed for investors willing to put money into companies and projects for a long term. These private ELTIFs would only invest in businesses that need money to be committed to them for long periods of time.
On 26th November 2014 the Commission reached a political agreement with the EU Council and Parliament for an investment plan for Europe including inter alias the launch of the ELTIFs.
In a nutshell, in order to qualify as an ELTIF, the fund will have to invest 70% of its assets in unlisted SMEs needing long-term capital and active in the infrastructure, real estate and intellectual property fields together with listed SMEs with a market capitalisation of less than EUR 500 million. Trading in assets other than long-term investments would only be permitted up to a maximum of 30 % of their capital. Finally, the use of derivatives would be restricted only to managing currency risk.
Funds which will want to use the ELTIF label will have to meet a number of requirements under the new regulation. An ELTIF would in all circumstances be considered as an EU AIF managed by an AIFM.
According to their nature, ELTIFs would predominantly attract institutional investors, even if they can be marketed to “semi-professional investors” and to other retail investors with investible portfolios of at least €100,000, provided they invest no more than 10% of their portfolio into ELTIFs.
The new regulation will come into effect 6 months after its publication in the EU Official Journal, which is expected for the beginning of this year, 2015.