On 20 April 2015, the European Council formally approved a new regulation aiming at creating a new investment vehicle channelling European investment directly to the real economy (the "Regulation"). The ELTIF project was initially announced by the European Commission back in October 2012 in the Single Market Act II communication and in the Green Paper on Long-Term Financing of the European Economy.
The ELTIF vehicle stands halfway between the AIFM and the UCITS rules.
An ELTIF must be an EU AIF and must be managed by an EU-authorised AIFM. As an alternative investment vehicle it will mainly invest (at least 70% of its capital) in illiquid assets such as shares of non-listed companies, certain loans and infrastructure projects.
Although subject to the AIFMD regime, ELTIFs may be granted a passport for marketing to retail investors in European Union under certain strict conditions such as the completion of an assessment of the retail investor patrimonial situation, the suitability of the ELTIF for that investor or the appointment by the ELTIF or its AIFM of a UCITS-compliant depositary. In order to offer managers a certain degree of flexibility, ELTIFs are also allowed to hold liquid assets (so-called UCITS eligible assets) up to 30% of their capital.
The Regulation will enter into force on the 20th day following its publication in the European Union Official Journal and will be applicable 6 months thereafter.
More detailed information on the subject will soon be available on our website.