Luxembourg’s financial supervisor CSSF is ready to conditionally give its green light for new applications of Eltif 2.0 funds, even as the market still awaits a final adoption of the regulatory and technical standards, known as the RTS, by the European Commission.
Marco Zwick (photo), the CSSF’s director in charge of supervising investment funds, told Investment Officer that Luxembourg will consider the amended standards as part of the review process, in case the Commission approves them.
“In case the EU Commission approves the RTS, the CSSF will apply them as part of its application review process,” Zwick said via email, adding that if the standards are not adopted when the Eltif 2.0 regulation enters into force on Wednesday, the review will rely on existing EU legislative texts, known as ”Level 1”. Under EU legislation, establishing the EU-wide supervisory standards is considered a “Level 2” action.
”In the absence of RTS by 10 January 2024, the CSSF, within its mandate of investor protection, will carefully review new Eltif fund applications by relying on the Level 1 EU texts and by requiring any changes which would become necessary once the RTS have been fully adopted at a later stage,” said Zwick.
‘Significant numbers’
CSSF since September has received “significant numbers” of applications for Eltif 2.0 funds, according to a person familiar with the Eltif market. An exact number however is not available. A CSSF spokesperson on Friday said these numbers will not be made public “in order to avoid any unnecessary international tensions” between supervisory authorities in Europe. The spokesperson did add however that CSSF has recently informed Esma of the approval of eight new Eltifs which will only appear in the next quarterly update of the official list of Eltifs maintained by Esma.
Addressing a Luxembourg conference at the end of November, Zwick said he was upbeat about the application numbers for Eltifs under the new regime. “There is a huge market to be exploited in this respect,” Zwick said. “We really believe it will be a very successful product.”
The total number of Eltifs issued since the first generation of legislation was adopted in 2025 last year increased to 93 by December, up from 77 a year earlier. Of these 93 funds, 57 are domiciled in Luxembourg; 21 in France, 13 in Italy and two in Spain. At the end of 2022 a total of 11.3 billion euro in private assets were managed by Eltifs, reflecting an average value of roughly 146 million euro per Eltif. Market forecasts project a significant increase in the coming years, with further growth seen towards some 35 to 50 billion by 2028 and roughly 100 billion by 2030.
Luxembourg “has been the jurisdiction of choice to launch Eltifs under the Eltif 1.0 regime as more than half of Eltifs have been approved in Luxembourg,” said Zwick in an earlier interview with Investment Officer. “The CSSF has gained a high level of expertise with this product and we are optimistic that with the revamped ELTIF 2.0 regime, the CSSF is able to capitalise on this experience for new fund launches under Eltif 2.0.”
Reducing the long-term liquidity mismatch
Within the European regulatory framework for Eltifs, the supervisory approach by CSSF, like its counterparts in other EU member states, is guided by the regulatory and technical standards.
“The CSSF focuses on investor protection and financial stability,” said Zwick. “With Eltifs, these two elements are closely related. The CSSF’s approach will be to make sure that the intrinsic liquidity mismatch between the asset side and the liability side of Eltifs will be managed in such a way to reduce that mismatch on a long term basis, in the best interest of potential redeeming investors, but equally important also in the best interest of the remaining investors and to ensure the stability of the portfolios which are intended to be exposed to longer term investments by their nature.”
Like traditional Ucits investment funds, Eltifs can also be distributed under a European product passport. So far most early adopters among Eltif issuers chose to market their funds in no more than four countries, mostly France, Luxembourg, Belgium, Spain and Germany.
BlackRock, via its Paris-based subsidiary acting as a Alternative Investment Fund Manager, or AIFM, has already registered several new Luxembourg Eltifs that it markets in 15 countries, including the Netherlands. Partners Group, Pictet, Amundi and Neuberger Berman, Mirova, Schroders and Goldman Sachs also launched Eltifs that target investors in multiple countries.
“The distribution rules for Eltifs are also intended to protect investors by distinguishing at the distribution stage those investors who can and those who should not be exposed to such a type of funds,” said Zwick. “The CSSF will then of course also verify that these rules are followed by the AIFMs.”