_The Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2015/760 as regards the scope of eligible assets and investments, the portfolio composition and diversification requirements, the borrowing of cash and other fund rules and as regards requirements pertaining to the authorisation, investment policies and operating conditions of European long-term investment funds (the “Review of the ELTIFs Regulation”) published by the EU Commission on 25 November 2021 aims at facilitating the raising and channelling of capital towards long-term investments in the real economy, in line with the EU’s objective of smart, sustainable and inclusive growth.
In short, the Commission would like to make the ELTIF a more attractive vehicle in the funds industry, considering the low number of ELTIFs established across the EU since 2015 (only 57 as of October 2021) as well as the small amount of assets under their management recorded so far.
The proposed Review of the ELTIFs Regulation would extended the types of assets in which ELTIFs can invest, such as equity or quasi-equity instruments issued by qualifying portfolio undertakings or by subsidiaries thereof, debt instruments, issuance of loans by the ELTIFs, participations in underlying funds, real assets, securitisations. Previous limits on portfolio composition would be increased allowing managers more flexibility. Master-feeder ELTIF structures would also be permitted.
With respect to borrowing provisions, ELTIFs marketed to retail investors would be able to borrow up to 50% of the value of their capital, while those marketed only to professional investors could borrow up to 100%; furthermore, borrowing would also be permitted for the purpose of making investments or providing liquidity and, under certain circumstances, it could be made in a currency other than the currency of the assets to be acquired.
Additional changes in the proposed Review of the ELTIFs Regulation would concern inter alia redemption policies, minimum investment requirements and conflict of interest provisions affecting the ELTIFs managers.
The EU Parliament and the Council are now required to examine the proposed Review of the ELTIFs Regulation in view of final deliberation.