January 2016 | The ELTIF
On December 9th 2015 the European Long Term Investment Fund (“ELTIF”) became directly applicable in each Member State of the European Union on the path to a smart, sustainable and inclusive economy. Private equity, infrastructure projects, aircraft, real assets and other illiquid assets investments will be facilitated for professional and retail investors. The ELTIF regulation complements the European Venture Capital Funds (EuVECA) and the European Social Entrepreneurship Funds (EuSEF) regulations, which have been applicable in all EU member states since July 2013. With this new regulation, the commission wants to stimulate growth and create jobs in these sectors.
What are the key features?
- a min. of 70% of the capital has to be invested in “eligible investment assets” meaning equity and debt instruments issued by, or loans granted to, non-financial, unlisted companies of lasting duration, and also real assets with a value of at least €10 million;
- an ELTIF is not allowed to invest more than 10% of its capital in units or shares of one or several other ELTIFS, European Venture Capital Funds (EuVECAs) and European Social Entrepreneurship Funds (EuSEFs), EuVECAs and EuSEFs are not allowed to invest more than 10% of their capital in ELTIFs;
- the investments have to be made in accordance with certain specific diversification rules. The amounts that are invested in the capital of individual eligible undertaking or real assets have to be restricted.
- ELTIFs may not borrow more than 30% of their capital;
- investors have limited redemption rights
- no redemption may occur before 5 years from the date of subscription and half the life of the ELTIF
- the amount of redemptions granted within a given period are restricted to a percentage of the ELTIF's more liquid, UCITS-eligible assets (if any);
- side letter agreements are not permitted
- all investors must benefit from equal treatment
- no preferential treatment or specific economic benefits may be granted to investors
- ELTIFs are subject to various product and transparency requirements, mainly the compliance of their AIFM with the Alternative Investment Fund Managers Directive, including publication of a prospectus.