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The ELTIF 2.0 (European Long Term Investment Fund) structure, came officially into force on the 10th of January 2024 amending the previous regulation known as ELTIF 1.0.
What changed?
Minimum Initial Investments: The amended regulation enables ELTIFs to raise capital from professional clients but also retail investors across the whole EU by removing the initial investment threshold constraints of the ELTIF 1.0.
Marketing Rules: The ELTIF 2.0 enjoys broader marketing rules for retail investors and more flexible investment rules. The suitability assessment for investors is now aligned with MiFID tests. This will enable private clients to access ELTIFs.
Eligible Assets: New eligible assets such as Green Bonds and Fintech companies are also included.
Investment scope in listed companies is now widened since listed companies with a market cap of EUR 1.5 billion or less can be considered eligible. The ELTIF 1.0 had a set market cap limit of EUR 500 million which was quite restrictive.
Investment Restrictions and Diversification: Investment restrictions in real assets decreased with the removal of the minimum investment threshold. Under ELTIF 1.0 each asset had to have a minimum of EUR 10 million which presented a significant diversification issue, especially for small – medium sized funds.
UCITS, and AIFs managed by European AIFMs are now eligible investments by ELTIFs which will allow the ELTIF to have liquid assets in the case of any redemptions. Master feeder structures will also be permitted (if the Master fund is also an ELTIF).
ELTIF 2.0’s investment policy and portfolio composition rules are also simplified.
Conclusion
The revised ELTIF regulation will boost investments in long-term fund vehicles in Europe. ELTIFs are recognised by institutional and professional investors and retail investors alike, especially those that are interested in making long-term investments.
Malta is an ideal jurisdiction especially for Small-Medium EU asset managers interested in setting up an ELTIF, since one will be able to benefit from the same advantages offered by the Directive given that the product is harmonised and fully pass portable at a more competitive cost with respect to other jurisdictions.
Further information can be found on the Podcast organised by Finance Malta together with one of the Directors of CC Fund Services (Malta) Ltd – Mr Steven Grech.
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