Long-term investment funds: Council confirms agreement with EP

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The Permanent Representatives Committee approved, on behalf of the Council, a compromise
agreed with the European Parliament on a regulation aimed at increasing the pool of capital
available for long-term investment into the EU economy by creating a new form of fund vehicle
(16386/14).
These European long-term investment funds (ELTIFs), by virtue of the asset classes that they
would be allowed to invest in, are expected to be able to provide investors with long-term, stable
returns.
The creation of clearly defined ELTIFs would tackle barriers to long-term investments in, for
example, infrastructure projects, thereby stimulating employment and economic growth. ELTIFs
would only focus on alternative investments that fall within a defined category of long-term asset
classes whose successful development requires investors’ long-term commitment. This would
include non-listed undertakings that issue equity or debt instruments for which there is no readily
identifiable buyer, real assets that require significant up-front capital expenditure and SMEs
admitted to trading on a regulated market or on a multilateral trading facility1
.
Only EU alternative investment funds (AIFs) that are managed by alternative investment fund
managers (AIFMs), authorised in accordance with directive 2011/61/EU, are eligible to market
themselves as ELTIFs. ELTIFs will be subject to additional rules requiring them, inter alia, to invest
at least 70% of their capital in clearly-defined categories of eligible assets. Trading in assets other
than long-term investments will only be permitted up to a maximum of 30% of their capital.
ELTIFs generally don’t offer redemption rights before the end of life of the ELTIF, which will have to
be clearly indicated as a specific date in the ELTIF rules or instruments of incorporation and
disclosed to investors.
ELTIFs will target both professional and retail investors in the EU. The regulation lays down rules
to protect investors, in particular retail investors. It requires the ELTIF manager or any distributor to
ensure that a retail investor with a portfolio2
of up to €500 000 doesn’t invest an aggregate amount
exceeding 10% of his/her portfolio in ELTIFs, provided that the initial amount invested in one or
more ELTIFs is not less than €10,000.

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