EFAMA Recommends Changes To Kick Start ELTIF Regime
Only around 28 ELTIFs have been established since the E.U.'s regulation became applicable in December 2015, with a low asset base (less than EUR2bn). From that perspective, the ELTIF Regulation has failed to meet its objective of boosting European long-term investments in the real economy.
Trade association the European Fund and Asset Management Association believes that the ELTIF regime – if properly adapted – can become a powerful tool to deliver on some of the Capital Markets Union’s (CMU) objectives and represent an attractive vehicle for investors in a low-for-long interest rate environment. The organisation recommends the following key changes to the current regime:
Turn ELTIF into an open-end structure alongside the existing closed-end one, by removing current limitations to its life cycle and by introducing appropriate redemption terms and include adequate liquidity management tools; broadening the scope of the current eligible asset provision to include other types of funds, besides ELTIFs, EuVECAs and EuSEFs, as well as non-listed financial start-up companies; lowering the current €10mn threshold for investments in “real assets”, thereby broadening choices for managers to consider smaller investment projects; removing quantitative limits (i.e., €500.000, 10% of the investable portfolio and a minimum of €10.000) and allow investments into ELTIFs as from €1.000 to reduce “supply-side” constraints; and guaranteeing the tax neutrality of the ELTIF structure to make it a worthwhile investment tool.
Commenting on the recommended changes, Federico Cupelli, senior regulatory policy adviser at EFAMA, said: “Profound changes are necessary to make ELTIFs an EU product of choice and help deliver on some of the CMU’s objectives. These include promoting more participation in less-liquid, real asset markets, as well as allowing both institutions and individuals to invest a part of their wealth over the long-term and diversify their exposure into private markets. In this regard, we advocate a recalibration of the Regulation’s asset eligibility requirements, minimum investment amounts and adequate tax incentives”.
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