A European Long-Term Investment Fund (ELTIF) is an investment vehicle that makes long-term investments into private (unlisted) assets. ELTIFs are regulated investment funds with low minimums, designed to be accessible to all investors. Previously, private investments were only available to high-net-worth and institutional investors. Non-ELTIF funds investing in private assets have high minimums and are unregulated, and therefore not available to retail investors.
ELTIFs were introduced in 2015 to help facilitate the long-term financing of companies and projects by reducing regulatory obstacles that limited the number of available investors. The aim of ELTIFs is to provide investors with the ability to participate in the long-term, stable returns offered by a diversified and restricted pool of private investments.
ELTIFs are typically structured as closed-ended funds with a defined maturity date. With some exceptions, that means investors enter the fund at one particular point in time and exit the fund at one particular point in time. Investment horizons with ELTIFs are usually 8-10 years making them similar to regular private equity funds. However, ELTIFs tend to target shorter investment periods than traditional PE funds to reduce the cash drag on the IRR, in the case of fully funded ELTIFs.
Click to explore more of the new rules and opportunities presented by ELTIF 2.0.
In general, the complexities associated with a closed investment structure in non-public assets will also exist in ELTIFs, such as the illiquid nature of the assets, the long-term investment horizon, and the inability to value the investment on a daily basis. Investors in ELTIFs should view their investments as essentially being inaccessible for the duration of the life of the ELTIF.
Subject to the investment rules and prohibitions mentioned above, ELTIFs can invest in assets such as private debt or equity in private European companies, venture capital, real assets, and infrastructure projects. Under the ELTIF 2.0 rules, they will be able to invest in other funds and other ELTIFs, thereby forming “fund of funds” opportunities for investors. Such other funds have to meet certain eligibility criteria, for example, have an EU Alternative Investment Fund Manager.
ELTIFs offer the following advantages to investors:
By creating a regulated vehicle through which to offer private investments and allowing minimum investment requirements that are more affordable to retail investors, ELTIFs represent a viable way to expand private equity investment to more investors while at the same time making more capital available to private companies and stimulating growth throughout the EU.
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