EFAMA outlines strategy to improve ELTIF regime
The European Fund and Asset Management Association (EFAMA) has shared its recommendations to the European Commission on measures to be taken to improve the European Long-Term Investment Fund (ELTIF) regime.
Very few ELTIFs were launched by professional investment managers since the Regulation became applicable in December 2015. Only around 28 ELTIFs have been established, with a low asset base (below EUR2 billion). From that perspective, the ELTIF Regulation has failed to meet its objective of
boosting European long-term investments in the real economy.
However, EFAMA believes that the ELTIF regime – if properly adapted – can become a powerful tool to deliver on some of the Capital Markets Union’s (CMU) objectives and represent an attractive vehicle for investors in a low-for-long interest rate environment.
EFAMA recommends the following key changes to the current regime:
• Turn ELTIF into an open-end structure alongside the existing closed-end one, by removing current limitations to its life cycle and by introducing appropriate redemption terms and include adequate liquidity management tools.
• Broaden the scope of the current eligible asset provision to include other types of funds, besides ELTIFs, EuVECAs and EuSEFs, as well as non-listed financial start-up companies.
• Lower the current EUR10 million threshold for investments in “real assets”, thereby broadening choices for managers to consider smaller investment projects.
• Remove quantitative limits (ie, EUR500.000, 10 per cent of the investable portfolio and a minimum of EUR10.000) and allow investments into ELTIFs as from EUR1.000 to reduce “supply-side” constraints.
• Guarantee the tax neutrality of the ELTIF structure to make it a worthwhile investment tool.
Federico Cupelli, senior regulatory policy adviser at EFAMA, says: “Profound changes are necessary to make ELTIFs an EU product of choice and help deliver on some of the CMU’s objectives. These include promoting more participation in less-liquid, real asset markets, as well as allowing both institutions and individuals to invest a part of their wealth over the long-term and diversify their exposure into private markets. In this regard, we advocate a recalibration of the Regulation’s asset eligibility requirements, minimum investment amounts and adequate tax incentives.”