Ireland on Monday took a step towards challenging Luxembourg’s dominance as hub for European Long-Term Investment Funds, known as Eltifs. Ireland will have three distinct categories of these funds, distinguishing professional investor Eltifs, qualified investor Eltifs, and for retail investor Eltifs.
Ireland’s financial supervisor, the Central Bank of Ireland (CBI), announced the completion of its regulatory framework for Eltifs under the revised Eltif 2.0 regime that took effect in the EU in January. This development, outlined in the CBI Markets Update, introduces a revised set of standards that promise to enhance the flexibility and appeal of Eltifs to investors and fund managers alike.
The updated framework, encapsulated in an update to the Alternative Investment Fund (AIF) Rulebook, now includes a dedicated Eltif chapter that sets forth the Central Bank’s requirements for Eltif authorizations. These guidelines are complemented by specific disclosure obligations detailed in the Eltif application forms, ensuring a transparent and streamlined process for fund managers seeking to navigate the Eltif landscape.
Softer stance
This regulatory milestone follows the European Commission’s publication of its intention to adopt draft Eltif regulatory technical standards. These standards propose significant amendments designed to provide fund managers with greater latitude in managing liquidity arrangements—a development warmly received by the industry.
The CBI›s feedback statement reflects a thoughtful consideration of industry input, indicating a softer stance than initially proposed in Consultation Paper 155 (CP155). The Central Bank has delineated three distinct categories of Irish Eltifs: professional investor Eltifs, qualified investor Eltifs, and retail investor Eltifs, allowing for a tailored approach to fund authorization that accommodates the diverse needs of the investor base.
A noteworthy aspect of the revised framework is the Central Bank’s accommodation of Eltif sub-funds within standalone Eltif products and umbrella AIFs. This flexibility enables the establishment of both Eltif and non-Eltif sub-funds under the same umbrella, catering to a broad spectrum of investment strategies and investor preferences.
Expedited process
Moreover, the CBI has extended the current Qualifying Investor AIF (QIAIF) 24-hour authorization framework to encompass both professional investor Eltifs and qualified investor Eltifs. This expedited process underscores the Central Bank’s commitment to facilitating timely access to the Eltif regime while upholding stringent investor protection standards.
In response to the operational nuances of Eltifs, the Central Bank has integrated guidance on share class features of closed-ended QIAIFs into the Eltif chapter. This inclusion allows for nuanced return allocations and participation schemes across different Eltif share classes, offering fund managers increased structural flexibility.
The final Eltif chapter also streamlines regulatory obligations by eliminating certain requirements that would duplicate or overlap with those stipulated in Eltif 2.0. These adjustments aim to simplify compliance while ensuring that Eltifs remain an attractive and viable investment vehicle for both retail and institutional investors.