When an Irish-domiciled Eltif, a European long-term investment fund, suspended redemptions late last year, it marked the first gating event in the European market and exposed the structural tension at the heart of the product.
The episode comes as Eltifs expand rapidly across Europe, with record product launches and growing distribution through banks and platforms, bringing private markets closer to retail investors.
“We are seeing a surge in semi-liquid structures, and that naturally creates challenges,” said Sonja Knorr, head of alternative funds at Scope Fund Analysis in Berlin, responding to a question from Investment Officer during a recent webinar. “In stress scenarios, these structures reach their limits. When redemption requests rise, the mechanisms have to be used.”
For Hosna Houbani, also at Scope, the issue is structural rather than cyclical. “Maturity transformation is a central issue. You combine illiquid assets with periodic liquidity, and that only works if expectations are managed and portfolios are constructed carefully.”
Greenman Open closed
That tension is now being tested in practice. In December 2025, Greenman Open, an Irish Eltif focused on grocery real estate in Germany, suspended redemptions after withdrawal requests exceeded its limits, becoming the first European Eltif to activate its gates. The fund counted some 8,000 Irish retail investors among its clients, all attracted by the 1,500 euro threshold and an app.
The episode reflects a broader pattern. “These are not isolated events,” Knorr said. “We have seen similar developments in open-ended real estate funds and in private credit in the US. Semi-liquid structures are inherently vulnerable when many investors want to exit at the same time.”
“In stress scenarios, these structures reach their limits. When redemption requests rise, the mechanisms have to be used”
Sonja Knorr, Scope Fund Analysis
Gating is a standard mechanism in semi-liquid funds, designed to prevent forced asset sales. Its use nevertheless raises questions about how retail investors will respond when access to their capital is restricted.
Greenman Open’s gates will remain closed for a minimum of 12 months. The firm said quarterly redemption requests exceeded 10 percent of the fund’s value. The fund’s manager, which manages some 1.3 billion euro in three Eltifs, on 4 March replaced its CEO and co-founder Johnnie Wilkinson. His successor Neil O’Keeffe, former head of legal at Apex Group, is now looking to raise 190 million euro by selling German retail real estate.
Momentum builds
Against that backdrop, the Eltif market continues to expand as a range of asset managers remain keen to launch products that are said to ‘democratize’ private investments and serve a business development logic backed by relatively high management fees.
Scope expects Eltif assets to grow by as much as 40 percent to 50 percent in 2026, potentially reaching 50 billion euro, and 80 billion in 2028, supported by broader distribution and rising engagement from retail investors particularly in Germany, France, and Italy.
New products are coming to market at pace. Carmignac is preparing the launch of an evergreen private equity Eltif. Ark Invest has entered the segment with a strategy offering exposure to private companies including SpaceX, whose anticipated IPO is already drawing attention among wealth managers and clients.
Morningstar counts 189 Eltifs authorised since 2024, with roughly half structured as evergreen vehicles. Even so, the market remains relatively small, with around 10 billion euros in evergreen assets at the end of 2025. Scope counted 113 new funds added last year, bringing the total registered to 268 funds per end 2025.
Return profile
Houbani warns that the long-term case for Eltifs will depend on delivery. “If return expectations are not met over time, especially compared to liquid markets, investor confidence will be difficult to sustain.”
Morningstar takes a more critical view. Its analysis suggests that many Eltif strategies may struggle to justify their illiquidity. Comparable returns have recently been available in liquid credit and equity markets, calling into question the visibility of any illiquidity premium.
“The ‘semi’ in semi-liquid isn’t just for show”
Mara Dobrescu, Morningstar
“Eltifs are arriving on retail platforms just as markets are being reminded that liquidity is not a given,” said Mara Dobrescu, senior principal at Morningstar. “The ‘semi’ in semi-liquid isn’t just for show.”
Fee structure
Scope’s analysis of 132 funds shows an average management fee of 1.80 percent per year, with private equity Eltifs at the higher end. Most funds also charge performance fees, typically above a fixed hurdle. Morningstar said it finds fee structures remain difficult to compare and, in some cases, misaligned with investor outcomes. Additional costs such as transaction expenses and leverage often sit outside headline figures.
At the same time, regulatory changes under Eltif 2.0 allow funds to hold a larger share of liquid assets, supporting redemption mechanisms but potentially diluting the illiquidity premium that underpins private market returns.
“Product complexity and investor understanding remain key concerns,” Houbani said. “You are asking retail investors to engage with liquidity windows, valuation timing and gating. That requires education, and we are not fully there yet.”
Distribution
Distribution remains uneven. Most Eltifs are still sold through bank networks, where advisers require significant training before recommending private market products. Deutsche Bank, which raised more than 500 million euro with its first Eltif, has trained more than 2,000 advisers in 39 separate events. Smaller institutions remain cautious, limiting scale.
Digital platforms are opening new channels. Neo-brokers like Trade Republic and Scalable Capital have begun offering Eltifs to a broader investor base, and more online banks, including Revolut, are expected to follow this year. The expansion increases reach, but also raises concerns about whether investors fully understand the risks associated with semi-liquid structures.
“Investors shouldn’t mistake smoother reported returns or infrequent pricing for lower risk,” Dobrescu said. “Due diligence on fees, liquidity terms, valuation practices and return targets is critical.”