On October 20, the European Securities and Markets Authority (ESMA) published the responses received to its consultation on Draft Regulatory Technical Standards (draft RTS) under Regulation (EU) 2015/760 (ELTIF Regulation). The ELITF Regulation, which entered into force on June 9, establishes a new investment vehicle, the European long-term investment fund (ELTIF), which will be available to all types of investors across the European Union, including retail investors. To qualify as an ELTIF, a fund must (among other things): (1) be managed by an authorized alternative investment fund manager; (2) have at least 70 percent of its capital invested in eligible investment assets; (3) not engage in short selling; and (4) be subject to strict limits on leverage and derivatives usage. The objective of the ELTIF Regulation is to provide long-term, stable returns by restricting the asset classes in which ELTIFs can invest, with the objective of stimulating employment and economic growth in the European Union. The draft RTS addresses when financial derivative instruments are used solely for hedging purposes, when the life of an ELTIF is considered sufficient in length, the criteria to be used for the orderly disposal of ELTIF assets, disclosure costs and availability to retail investors.
ESMA is expected to finalize the draft RTS in the next few months, which will then be submitted to the European Commission for endorsement.
A copy of ESMA’s consultation paper on the ELTIF Regulation, including the draft RTS and responses can be found here.