The trade association representing Europe’s fund and asset management sector has urged the executive body of the European Union to ensure that the correct technical standards are introduced. These standards are vital for the success of the new regime for European Long Term Investment Funds, known as Eltif 2.0.
A significant update to the EU legal regime for Eltifs was introduced on 10 January. Its effective application still hinges on the final adoption of Regulatory Technical Standards (RTS), proposed just before Christmas by the European Securities and Markets Authority (Esma). The Commission is currently considering the need to amend the draft RTS tabled by Esma and is due to speak out before the end of February.
Harmful proposals
Efama, as industry group, has called on decision-makers in Brussels to reconsider some of the more damaging proposals to ensure the future success of the Eltif product.
«It will be crucial that the accompanying technical standards follow the spirit of the Eltif Regulation and align with broader trends and best practices in liquidity management,» said Tanguy Van de Werve, managing director of fund trade association Efama, in a statement accompanying the release of its Eltif 2.0 FAQ paper.
«With the correct regulatory parameters in place, Eltif could significantly contribute to the sustainable transition through alternative, long-term investments, benefitting the European economy,» the Efama chief said.
Mixed reviews for draft RTS
Esma’s draft RTS, published on 19 December, has received mixed reviews. It appears to be a compromise among financial supervisors in Europe, especially those in Luxembourg and France. The principles-based approach favoured by Luxembourg’s supervisor, CSSF, has been partially included in the Esma draft. However, market participants and their legal advisors are concerned that some proposed measures, particularly a mandatory 12-month notice period for redemptions, still present obstacles.
Luxembourg is eager to maintain its position as the leading Eltif hub in Europe under the updated regime. It is already the legal domicile for the approximately 90 Eltif funds launched under the earlier legal regime introduced in 2015. The update, now implemented, sought to address significant flaws in the initial regime and has sparked hopes and expectations that Eltif 2.0 will open the doors to private investments for retail investors.
Like traditional Ucits investment funds, Eltifs can be distributed under a European product passport. So far, most early adopters among Eltif issuers have chosen to market their funds in no more than four countries, mainly France, Luxembourg, Belgium, Spain, and Germany.
BlackRock, through its Paris-based subsidiary acting as an Alternative Investment Fund Manager (AIFM), has already registered several new Luxembourg Eltifs that it markets in 15 countries, including the Netherlands. Partners Group, Pictet, Amundi, Neuberger Berman, Mirova, Schroders, and Goldman Sachs have also launched Eltifs targeting investors in multiple countries.
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