1. ELTIF: distributing alternative strategies to nonprofessional investors
Regulation (EU) 2015/760 on European long-term investment funds (ELTIF) has been amended by the revised ELTIF Regulation which is applicable since 10 January 2024.
On 25 October 2024, Commission Delegated Regulation (EU) 2024/2759 of 19 July 2024 supplementing the ELTIF Regulation (ELTIF RTS) was published in the Official Journal of the European Union. The ELTIF RTS enter into force on 26 October 2024.
On 25 October 2024, Commission Delegated Regulation (EU) 2024/2759 of 19 July 2024 supplementing the ELTIF Regulation (ELTIF RTS) was published in the Official Journal of the European Union. The ELTIF RTS enter into force on 26 October 2024.
These 'democratized' vehicles have been structured mainly as ELTIFs or Luxembourg undertakings for collective investment setup under part II of the Law of 2010 or the combination of ELTIFs and Part II structures. The Part II fund is a Luxembourg domestic AIF that may accept all types of investors, including retail.
The ELTIF regime enables alternative investment fund managers to market their AIFs in the EEA with a passport to retail investors. Part II funds have been wellknown to investors beyond the EEA for several decades.
An ELTIF may be set-up as a Part II fund (or a compartment thereof) to release the full potential of its retail marketing passport.
2.Overview of Luxembourg investment vehicles
3. ELTIF key features
- Alternative investment fund (AIF) – subject to AIFMD
- Managed by an authorised AIFM – no sub-threshold AIFM
- Authorised and supervised by the financial regulator (CSSF) – for compliance with ELTIF Regulation aspects
- Authorisation at the level of the sub-fund - possible to add ELTIF sub-funds to an existing structure
- EU marketing passport for professional and retail investors – unique advantage for AIFs
- Objective to facilitate the raising and channeling of capital towards long-term investments in the real economy
4. EU marketing passport
- The ELTIF Regulation is directly applicable in all EU countries
- Member states are not allowed to add requirements in the field covered by the ELTIF Regulation (art. 1 paragraph 3)
- Notification procedure as per AIFMD for both professional and retail investors
5. Eligible investors and distribution
| ELTIF | ELTIF - UCI Part II | ELTIF - RAIF, SIF or SICAR |
| ELIGIBLE INVESTORS | ||
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| DISTRIBUTION | ||
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| Delegating to / appointing distributor(s) possible | ||
6. Marketing to retail investors – additional requirements
Suitability test
- Obtaining information about retail investor (MIFID
II):
- their knowledge and experience in the investment field
- their financial situation
- their investment objective
- Providing statement on suitability (MIFID II)
- Express consent of investor possible in case of negative statement
- No MIFID II license required for AIFM marketing directly
Depositary – additional requirements (application of UCITS depositary regime):
- Entity authorised to act as depositary for UCITS (e.g. credit institution)
- No discharge of liability in the event of loss of financial instruments held by a 3rd party
- Liability of depositary cannot be excluded or limited
- Assets cannot be reused by depositary
PRIIPs Regulation
- PRIIPS KIDs
AIFMD
- Facilities: arrangement in host country(ies) to inform investors, handle orders, liaise with regulator... (no physical presence required)
7. ELTIF secondary market
- Listing of ELTIF possible
- Allowing free transfer of shares/units/interests is
mandatory
- subject to complying with regulatory requirements and conditions set out in the prospectus
- Possibility to provide for full or partial matching of
transfer requests between existing and potential investors
as detailed in the ELTIF RTS
- subject to conditions set out in a detailed policy (role of AIFM, timing, price, ratio, costs and fees)
8. Conditions for redemptions upon request
- ELTIFs can be structured as closed-ended vehicles or open-ended vehicles
- Redemptions are possible if provided for in the ELTIF documentation
- Timeframe: not during ramp-up OR not during minimum holding period (except for feeder ELTIFs)
- ELTIFs have to put in place a redemption
policy and liquidity management tools
compatible with the long-term investment strategy
- Anti-dilution liquidity management tool: ELTIF manager may discretionarily select and implement at least one tool among anti-dilution levies, swing pricing and redemption fees and may select other tools under certain conditions
- Redemptions on pro rata basis if requests exceed maximum % (possibility to foresee gating provisions)
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
