ELTIF - Provisional agreement reached on European long-term investment funds

12/01/2023

On 19 October 2022, Council of the EU published the provisional agreement reached on European long-term investment funds (ELTIF).

The ELTIFregulatory framework sets out detailed fund rules on eligible assets and investments, diversification and portfolio composition, leverage limits and marketing. ELTIFs are the only type of funds dedicated to long-term investments that can be distributed on a cross-border basis to both professional and retail investors.

However, since the adoption of the regulation in 2015 only a few ELTIFs have been launched due to significant constraints in the distribution process (demand-side) and stringent rules on portfolio composition (supply-side).

In their agreement, the co-legislators intend to overcome a number of supply-side and demand-side limitations. They clarified in particular the scope of eligible assets and investments, the portfolio composition and diversification requirements, the conditions for borrowing and lending of cash and other fund rules, including sustainability aspects. The package also includes rules to make it easier for retail investors to invest in ELTIFs while ensuring strong investor protection.

Following technical and legal revision, the finalised text will be submitted to the the Council and the European Parliament for adoption.