European Long Term Investment (ELTIFS) Fund Regulation
Regulation
Commission legislative proposal
June 2013
General Approach Agreed
June 2014
Trilogues commence
Q4, 2014
Latest news:
On 17 April 2014, the European Parliament adopted amendments to the proposal
for a Regulation as set out in the Parliament’s statement. The proposal was sent
back to the Economic and Financial Affairs Committee (ECON) for reconsideration
with the vote postponed to a future plenary. Rodi Kratsa-Tsagaropoulou, MEP (GR,
EPP) author of the European Parliament’s report on ELTIFs was not re-elected in
the 2014 EP elections. A new rapporteur Jeppe Kofod (S&D, DK) has been assigned
to this dossier.
The Greek Presidency secured a General Approach with the Council on this dossier
on Tuesday, 25 June 2014; having negotiated a compromise on the remaining
outstanding issues (how to deal with the marketing of the funds to retail investors
and the investor protection rules that should apply).
The Italian Presidency expects to begin trilogues with the European Parliament
from October 2014.
Overview
On 26 June 2013, the European Commission adopted a proposal
on a Regulation for European Long Term Investment Funds
(ELTIFs). Linked to the Green Paper on Long-Term Financing, the
proposal aims to increase the pool of available capital for long
term investments in the EU economy. ELTIFs would invest in
illiquid assets which are difficult to buy and sell and would have
to meet a set of common rules so that they:
• always have a depositary to keep assets safe;
• comply with rules on spreading assets to prevent too much
money into one asset;
• only use derivatives to manage currency risks in relation to
the assets they hold, and not for speculation; and
• obey limits on the amount they borrow.
The General Approach agreed in June 2014 sets out the:
Description of the product: An ELTIF will be an Alternative
Investment Fund (AIF) with an Alternative Investment Fund
Manager (AIFM) authorised under AIFM Directive. The ELTIF will
have a European passport with an ELTIF label.
Structure: Closed ended with a primary objective to invest in
long-term illiquid assets, e.g. infrastructure projects
Loan origination: Permitted without restriction to portfolio
undertakings. No additional rules apply to this type of
investment.
Leverage: An ELTIF may borrow up to 30% of its capital but
cannot use this to make loans. Derivatives may only be used for
hedging purposes.
Permitted investors: Professional and retail investors. An ELTIF
which markets to retail investors is subject to a number of
additional requirements including the obligation to publish a Key
Information Document.