The European Parliament has adopted the European Commission's (EC’s) 2021 proposals for amendments to the European Long-Term Investment Funds (ELTIF) regulation. The revised regulation is anticipated to be released in March 2023 and go live in Q1 2024. A series of legislative changes were suggested by the EC, including bringing a wider range of assets under the regulation’s mandate, sanctioning investments in fintechs and green bonds, and increasing the market capitalisation threshold. Fund rules will become more flexible around risk diversification requirements, with an increased pocket for liquid investments made available. Market participants will be able to invest in fund-of-funds and master-feeder structures. Additionally, retail investors will see the removal of the €100,000 entry ticket and minimum net worth requirement, making ELTIFs more accessible and safer to use. The ELTIF suitability test will be aligned with MiFID II to ensure consistent distribution strategies. These changes are expected to benefit both asset managers and investors, with EFAMA stating that ELTIFs will have the potential “to become an attractive ‘go-to’ fund structure for long-term investments.” Antoine de la Guéronnière, vice-chair of the EFAMA fund regulation standing committee, comments: “The changes to the current ELTIF framework are a necessary step forward that will assist ELTIF in becoming a complementary source of financing for the European real economy and accessing the almost untapped retail market for longer-term real assets investments.” Elona Morina, regulatory policy adviser at EFAMA, adds: “As the new criteria have finally been brought in line with what is required to make the product an attractive and competitive long-term investment structure, the redesign of ELTIF is generating a great deal of interest among industry participants.”
