COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT REPORT Accompanying 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
Date: 2021-11-25
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: European Investment Fund, investment company, investment project, investment promotion, investment protection, long-term financing, regulation of investments

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 25.11.2021  SWD(2021) 342 final  COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT REPORT  Accompanying 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 {COM(2021) 722 final} - {SEC(2021) 571 final} - {SWD(2021) 343 final}  
 
 
TABLE OF CONTENTS 

LIST OF TABLES AND FIGURES ............................................................................................................ 2 

GLOSSARY .................................................................................................................................................. 3 

1. 

INTRODUCTION: POLITICAL AND LEGAL CONTEXT ......................................................... 5 

1.1.  Background ........................................................................................................ 5 
1.2.  Political and legal context ................................................................................. 6 

2. 

PROBLEM DEFINITION ................................................................................................................. 8 

2.1.  Evaluation .......................................................................................................... 8 
2.2.  Problem tree overview ..................................................................................... 10 
2.3.  Problems .......................................................................................................... 11 
2.4.  Problem drivers ............................................................................................... 12 
2.5.  Consequences .................................................................................................. 17 
2.6.  Potential problem evolution without EU action: the baseline scenario ........... 19 

3. 

EU’S RIGHT TO ACT AND JUSTIFICATION ........................................................................... 20 

3.1.  Legal basis ....................................................................................................... 20 
3.2.  Subsidiarity: Necessity of EU action ............................................................... 20 
3.3.  Subsidiarity: Added value of EU action .......................................................... 21 

4.  OBJECTIVES: WHAT IS TO BE ACHIEVED? .......................................................................... 21 

4.1.  General objectives ........................................................................................... 22 
4.2.  Specific objectives ........................................................................................... 22 

5.  AVAILABLE POLICY OPTIONS AND IMPACT ....................................................................... 23 

5.1.  Baseline from which options are assessed ....................................................... 23 
5.3.  Options discarded at an early stage ................................................................. 32 

6.  HOW DO THE OPTIONS COMPARE? ........................................................................................ 33 

6.1.  Greater flexibility in the ELTIF regime for professionals-only ELTIFs ......... 33 
6.2.  Removing the restrictions for the access by retail investors ........................... 36 
6.3.  Comparison of options on the redemption regime .......................................... 38 

7. 

PREFERRED OPTIONS AND IMPACTS OF THE PROPOSED POLICY OPTIONS ........... 42 

7.1.  Preferred options ............................................................................................. 42 
7.2.  Estimated impacts ............................................................................................ 45 

8.  REFIT (SIMPLIFICATION AND IMPROVED EFFICIENCY) ................................................ 49 

9.  MONITORING AND EVALUATION ............................................................................................ 50 

ANNEX 1: PROCEDURAL INFORMATION ........................................................................................... 54 

ANNEX 2: STAKEHOLDER CONSULTATION ...................................................................................... 60 

ANNEX 3: WHO IS AFFECTED BY THE INITIATIVE AND HOW ...................................................... 84 

ANNEX 4:  METHODOLOGICAL  APPROACH,  ANALYTICAL  METHODS  AND 

LIMITATIONS ................................................................................................................................... 89 

ANNEX 5: EVALUATION OF RELEVANT PROVISIONS OF THE ELTIF REGULATION ............... 95 

ANNEX 6: STATISTICAL DATA ON THE ELTIFS .............................................................................. 105 

ANNEX 7 ANALYSIS OF FUND RULES NOT COVERED BY THE IMPACT ASSESSMENT......... 112 

1 

 
 LIST OF TABLES AND FIGURES 

TABLE 1 – Evaluation of the ELTIF regime (key findings)………………………………….... 9 

GRAPH 1 – Problem tree………………………………………………………………………. 11 

GRAPH 2 – General and specific objectives ………………………………………………….. 21 

TABLE 2 – Policy options assessing the application of the fund rules to all investor  

categories …………………………………………………………………………………….... 27 

TABLE 3 – Policy options assessing the specific requirements concerning reduction 

of ELTIF barriers to participation of retail investors………………………………………….. 28 

TABLE 4 - Policy options assessing the redemption policy and life-cycle of ELTIFs……….. 30 

TABLE 5 - Greater flexibility in the ELTIF regime for funds marketed only to professional 
investors (summary of impacts)……………………………………………………………….. 36 

TABLE 6 - Removing the restrictions for the access by retail investors (summary of  

impacts)………………………………………………………………………………………... 38 

TABLE 7 - Optional liquidity windows redemption mechanism……………………………... 41 

2 

 
 
 
 
GLOSSARY 

Term or acronym 

Meaning or definition 

AIF or AIFs 

Alternative Investment Funds 

AIFM or AIFMs 

Alternative Investment Fund Manager 

AIFMD 

AMF 

AuM 

CMU 

CNMV 

Consob 

CSSF 

Directive  2011/61/EU  of  the  European  Parliament  and  of  the 
Council  of  8  June  2011  on  Alternative  Investment  Fund 
Managers 

Autorité des Marchés Financiers 

Assets under management 

Capital Markets Union 

Comisión Nacional del Mercado de Valores 

Commissione Nazionale per le Societa e la Borsa 

Commission de Surveillance du Secteur Financier 

ELTIF or ELTIFs 

European long-term investment fund(s) 

ELTIF Regulation 

Regulation  (EU)  2015/760  of  the  European  Parliament  and  of 
the Council of 29 April 2015 on European long-term investment 
funds (OJ L 123, 19.5.2015, p. 98) 

ESMA 

EuSEF 

EuVECA 

FISMA 

HLF 

KID 

MiFID II 

MiFIR 

European Securities and Markets Authority 

European Social Entrepreneurship Fund 

European Venture Capital Fund 

Directorate-General  for  Financial  Stability,  Financial  Services 
and Capital Markets Union 

High-Level Forum on the Capital Markets Union 

Key Information Document 

Directive  2014/65/EU  of  the  European  Parliament  and  of  the 
Council  of  15  May  2014  on  markets  in  financial  instruments 
(OJ L 173, 12.6.2014, p. 349, as amended) 

Regulation  (EU) No 600/2014  of the European Parliament and 
of  the  Council  of  15  May  2014  on  markets  in  financial 
instruments (OJ L 173, 12.6.2014, p. 84, as amended) 

NAV 

Net Asset Value  

NCA or NCAs 

National Competent Authority(ies) 

PRIIPs 

Packaged Retail Investment and Insurance Products 

PRIIPs Regulation  

Regulation (EU) No 1286/2014 of the European Parliament and 
of  the  Council  of  26  November  2014  on  key  information 

3 

 
 
Professional investor 

documents  for  packaged  retail  and  insurance-based  investment 
products (PRIIPs) (OJ L 352, 9.12.2014, p. 1, as amended) 

An  investor  which  is  considered  to  be  a  professional  client,  or 
may,  on  request,  be  treated  as  a  professional  client  in 
accordance with Annex II to Directive 2014/65/EU (Article 2(2) 
of the ELTIF Regulation) 

Retail investors 

An  investor  who  is  not  a  professional  investor  (Article  2(3)  of 
the ELTIF Regulation) 

UCITS 

UCITS Directive 

Undertakings 
Securities 

for  Collective 

Investment 

in  Transferable 

Directive  2009/65/EC  of  the  European  Parliament  and  of  the 
Council of 13 July 2009 on the coordination of laws, regulations 
and  administrative  provisions  relating  to  undertakings  for 
collective  investment  in  transferable  securities  (UCITS)  (OJ  L 
302, 17.11.2009, p. 32, as amended) 

4 

 
 
 
1. 

INTRODUCTION: POLITICAL AND LEGAL CONTEXT 

1.1. 

Background 

Regulation  (EU)  2015/760  of  the  European  Parliament  and  of  the  Council  of  29  April 
2015  on  European  long-term  investment  funds  (hereinafter:  ELTIF  Regulation)1  is  a 
European  framework  for  Alternative  Investment  Funds  (AIFs)  that  invest  in  long-term 
investments,  such  as  infrastructure  projects,  real  estate,  listed  and  unlisted  SMEs.  The 
ELTIF Regulation establishes uniform rules on the authorisation, investment policies and 
operating conditions and marketing of ELTIFs.  

The ELTIF regime is intended to facilitate long-term investments in these types of assets 
by  institutional  and  retail  investors  and  provide  an  alternative,  non-bank  source  of 
finance to the real economy. Such long-term finance can support the development of the 
European economy along the path of smart, sustainable and inclusive growth.  

Since the adoption of the ELTIF legal framework in April 2015, only a limited number of 
ELTIFs  have  been  launched  with  a  relatively  small  amount  of  net  assets  under 
management  (total  assets  under  management  are  estimated  at  approximately  EUR  2.4 
billion  in  2021).  As  of  October  2021,  ESMA’s  register  of  ELTIFs  listed  57  authorised 
ELTIFs  and  these  funds  were  domiciled  in  only  four  Member  States  (Luxembourg, 
France,  Italy  and  Spain),  while  the  remaining  Member  States  had  no  domestic  ELTIFs 
(for more detailed information on the ELTIF market see Annex 6).2  

While the ELTIF is still a relatively new framework, the available market data indicates 
that the development of the market has not scaled up as expected, particularly given the 
Commission’s objective of promoting long-term finance in the EU as part of the CMU. 
An evaluation of the framework in Annex 5 concludes that there is a need for a targeted 
review of certain legal and policy elements of the ELTIF framework.  

Since the publication of the first  Capital Markets Union (CMU) Action Plan in 2015, a 
number of actions have been taken in the context of developing more long-term sources 
of  funding  in  the  EU3.  But  it  has  become  apparent  that  further  policy  interventions  are 
necessary to ensure that more investments are channelled to businesses in need of capital 
and to long-term investment projects, particularly during the recovery from the Covid-19 
pandemic.  

This  review  aims  to  increase  uptake  of  ELTIFs  across  the  EU  for  the  benefit  of  the 
European  economy  and  investors.  This,  in  turn,  would  support  the  continued 
development of the CMU, which also aims to make it easier for EU companies to access 
more stable and diverse long-term financing. The European Commission Green Paper on 

European  Commission.  Action 

OJ L 123, 19.5.2015, p. 98. 
Register  of  Authorised  ELTIFs.  ESMA34-46-101.  Source:  https://www.esma.europa.eu/document/register-

1  
2  
authorised-european-long-term-investment-funds-eltifs (Available: 5 June 2021). 
3  
a  Capital  Markets  Union.  Source: 
https://ec.europa.eu/info/publications/2015-action-plan-building-capital-markets-union_en 
(Available:  8  February 
2021). In this connection, it needs to be noted that tackling the climate crisis and managing the energy transition to a 
low carbon economy, as well as other environmental and social challenges requires a long-term horizon and associated 
longer-term investments. The success of these investments in new technologies and infrastructures requires effective 
regulatory frameworks and robust and cost-effective financial structures. 

building 

plan 

on 

5 

 
 
 
 
 
 
 
 
                                                           
Long-term  Financing  of  the  European  Economy4  also  revealed  that  Europe  needs  to 
promote  more  smart,  sustainable  and  inclusive  growth,  creating  jobs  and  enhance  its 
global  competitiveness.  This  priority  was  further  supported  by  the  Commission’s  Mid-
Term  Review  of  the  CMU  Action  Plan5,  which  determined  that  the  EU  has  been 
suffering from a chronic lack of long-term financing for SMEs when compared to other 
major economies. 

To  fund  long-term  investments  in  the  European  economy,  governments  and  businesses 
need  access  to  predictable  long-term  financing.  The  availability  of  such  financing 
depends  on  the  ability  of  the  financial  system  to  channel  the  savings  of  governments, 
corporates  and  households  safely  and  efficiently  to  the  right  investments  through  open 
and competitive markets. ELTIFs have a crucial role to play in this area by providing a 
dedicated  investment  product  to  mobilise  capital  for  the  financing  of  projects  such  as 
transport 
social 
infrastructure  (such  as  housing  for  seniors  or  hospitals),  new  technologies  and  systems 
that reduce the use of resources and energy and further growth of Europe’s SME sector.  

sustainable  energy  generation  or  distribution, 

infrastructure, 

The Commission conducted an open public consultation (see Annex 2)6 and a number of 
targeted consultations with a wide range of stakeholders to assess the functioning of the 
ELTIF framework (see sources and evidence used in the impact assessment in Section 5 
of  Annex  I).  These  consultations  allowed  the  Commission  to  explore  with  those 
stakeholders a  range of  possible policy options to  tailor and, where appropriate, amend 
the provisions of the ELTIF Regulation. 

This  impact  assessment  identifies  a  number  of  barriers  and  limitations  in  the  current 
framework that have limited the market’s uptake of the ELTIFs and an assessment of the 
identified options to address these issues. 

1.2. 

Political and legal context 

In  June  2020,  the  High  Level  Forum  (HLF)  on  the  Capital  Markets  Union  (CMU) 
published its final report7 that contained 17 recommendations aimed at removing barriers 
in the EU’s capital markets, including  a recommendation for the targeted review of the 
ELTIF Regulation. According to the report, a review of the ELTIF regime with targeted 
amendments  could  accelerate  the  uptake  by  investors  with  a  long-term  investment 
horizon and increase the flow of long-term financing to the real economy.8  

Furthermore,  the  Commission’s  revised  CMU  Action  Plan9  explicitly  recognised  the 
need  to  further  support  investment  vehicles  that  channel  financing  to  long-term 

292 

COM(2017) 

Commission. 

COM/2013/0150 final. 
European 

4  
5  
https://ec.europa.eu/info/sites/default/files/communication-cmu-mid-term-review-june2017_en.pdf (2 May 2021). 
6  
European Commission. Consultation document: Public consultation on the review of the European long-term 
investment funds (ELTIF) regulatory framework. Source: https://ec.europa.eu/info/files/2020-eltif-review-consultation-
document_en (8 February 2021). 
7  
Final  report  of  the  High  Level  Forum  on  the  Capital  Markets  Union  -  A  new  vision  for  Europe’s  capital 
markets.  10  June  2020.  Source:  https://ec.europa.eu/info/files/200610-cmu-high-level-forum-final-report_en  (8 
February 2021). 
8  
Ibid, page 12. 
9  
Communication  from  the  European  Commission.  A  Capital Markets  Union  for people  and  businesses-new 
action  plan.  COM(2020)  590  final.  24  September  2020.  Source:  https://ec.europa.eu/info/law/better-regulation/have-
your-say/initiatives/12498-A-Capital-Markets-Union-for-people-and-businesses-new-action-plan (8 February 2021).  

Source: 

final. 

6 

 
 
 
 
 
 
 
                                                           
investment  projects.10  In  the  Action  Plan,  the  Commission  committed  to  review  the 
legislative framework for ELTIFs.11 

It  should  be  noted  that  the  review  of  the  ELTIF  framework  has  strong  links  with  the 
CMU,  the  European  Green  Deal12,  European  Energy  Union13  and  other  Union  policy 
initiatives, including the recovery from the Covid-19 pandemic. Against this background, 
on  2  December  2020,  the  Council  of  the  European  Union  in  its  conclusions  urged  the 
Commission to review the ELTIF regime.14 

The  ELTIF  regime  is  also  closely  linked  to  Alternative  Investment  Fund  Managers 
Directive  2011/61/EU  (the  AIFMD)  since  the  AIFMD  forms  the  legal  framework 
governing the management and marketing of alternative investment funds (AIFs) in the 
Union. By  definition, ELTIFs  are EU AIFs that are managed by  alternative investment 
fund managers (AIFMs) authorised in accordance with the AIFMD. As a result, the rules 
applicable to ELTIF managers are set out and governed by those in the AIFMD. Given 
the  inter-linkages  of  the  ELTIF  Regulation  with  the  AIFMD  framework,  it  is  also 
important  to  note  that  in  addition  to  this  ELTIF  review,  the  Commission  is  also 
reviewing  the  AIFMD.15  It  is  anticipated  that  both  proposals  will  be  adopted 
simultaneously16. Further information on the linkages between the two frameworks is set 
out in Section 2.3. of Annex 5. 

The requirement to review the functioning of the ELTIF framework is mandated by the 
co-legislators in Article 37 of the ELTIF Regulation, which requires the Commission to 
review  the  functioning  of  the  ELTIF  framework.17  Following  the  review  and  after 
consulting  ESMA18,  which  was  completed  in  February  2021,  the  Commission  is  also 
required to submit to the co-legislators a report assessing the contribution of the ELTIF 
Regulation  to  the  completion  of  the  CMU  and,  if  appropriate,  present  a  legislative 
proposal. 

European  Commission.  Energy  Union  Strategy.  Source:  https://ec.europa.eu/energy/topics/energy-

Ibid, page 8 (Action 3). 
European  Commission.  A  European  Green  Deal.  Source:  https://ec.europa.eu/info/strategy/priorities-2019-

10  
The Action Plan has discussed possible “changes to the legislative framework and increased incentives to use 
the ELTIF fund structure could promote the introduction of pan-European long-term investment funds and ultimately 
channel more funding, including from retail investors, into the EU's real economy”. Ibid, page 8. 
11  
12  
2024/european-green-deal_en (6 June 2021). 
13  
strategy/energy-union_en (6 June 2021). 
14  
More specifically, the Council has urged the Commission “to prioritise and accelerate the work on … inter 
alia … improving the regulatory framework for long-term investment vehicles by reviewing the European Long-Term 
Investment  Fund  (ELTIF)  Regulation,  thereby  particularly  taking  into  account  the  need  to  support  the  non-bank 
financing of SMEs and of long-term investment in infrastructure, which is needed for the transition to a sustainable and 
digital  economy”.  Council  of  the  European  Union  Conclusions  on  the  Commission’s  CMU  Action  Plan.  Reference 
12898/1/20. 
Source: 
https://data.consilium.europa.eu/doc/document/ST-12898-2020-REV-1/en/pdf (8 February 2021). 
15  
AIFMD and the acts adopted for its implementation. See Recitals (8) to (10) of the ELTIF Regulation. 
16  
Source: 
say/initiatives/12648-Alternative-Investment-Fund-Managers-review-of-EU-rules/public-consultation_en 
2021). 
17  
The ELTIF Regulation, Article 37, notably requires that the review should analyse, in particular the impact 
of  the  redemption  policy  and  life  of  ELTIFs),  the  impact  on  asset  diversification  of  the  application of  the  minimum 
threshold of 70% of eligible investment assets, the extent to which ELTIFs are  marketed in the Union, the extent to 
which  the  list  of  eligible  assets  and  investments  should  be  updated,  as  well  as  the  diversification  rules,  portfolio 
composition and limits regarding the borrowing of cash. 
18  
It  should  be  noted  that  the  European  Commission  has  conducted  the  consultation  of  ESMA.  See  ESMA 
response to the European Commission dated 3 February 2021 on the  functioning of the ELTIF regime. ESMA34-46-
99.  Source:  https://www.esma.europa.eu/press-news/esma-news/esma-provides-input-commission-improvements-eltif 
(27 April 2021). 

https://ec.europa.eu/info/law/better-regulation/have-your-
(25  May 

The  rules  applicable  to  ELTIFs  are  thereby  built  on  the  existing  regulatory  framework  established  by  the 

Commission. 

December 

European 

ECOFIN 

Adopted 

19(e). 

1023. 

2020. 

Point 

2 

7 

 
 
 
 
                                                           
2. 

PROBLEM DEFINITION 

2.1. 

Evaluation 

From the EU  acquis perspective, ELTIFs are a sub-segment of AIFs and are subject  to 
the  rules  of  the  AIFMD  framework  in  addition  to  the  requirements  of  the  ELTIF 
framework. The ELTIF is a voluntary regulatory regime and asset managers can choose 
among a range of structures when establishing their funds. 

Compared to these alternative AIF structures, the ELTIF regime has certain advantages. 
First, it is a fully harmonised European label for financial products, which allows for an 
EU-wide  passport-based  marketing  to  both  professional  and  retail  investors.  In 
comparison, AIFs under the AIFMD can only be passported to professional investors and 
marketing to retail investors is subject to national rules. The ELTIF fund rules can also 
offer  the  capacity  to  withstand  market  volatility  due  their  closed-ended  nature  and  in 
certain  cases  preferential  national  tax  treatments  for  ELTIF  investors.  ELTIFs  can  also 
represent  a  safer  pathway  for  investors  interested  in  private  equity  investments  but 
present a lower risk profile than pure private equity funds.  

Nevertheless, the advantages of ELTIFs are diminished by the restrictive fund rules and 
barriers  to  entry  for  retail  investors,  the  combined  effect  of  which  reduce  the  utility, 
effectiveness and attractiveness of the ELTIF regime for managers and investors. Based 
on  the  evaluation  of  the  functioning  of  the  ELTIF  regime  (see  Annex  5)  and 
stakeholders’  feedback,  these  restrictions  are  the  key  drivers  of  the  ELTIFs  failure  to 
scale  up  significantly  and  reach  their  full  potential  to  channel  investments  to  the  real 
economy. 

As  of  October  2021,  ESMA’s  register  of  ELTIFs  has  recorded  only  57  ELTIFs.  The 
approximate total ELTIF AuM across Europe only amounted to approximately EUR 2.4 
billion, representing a tiny fraction of the total EU  AIFs market  (EUR 6.8 trillion  as at 
the  end  of  2020).19  As  of  May  2021,  French  and  Luxembourg  ELTIFs  held  the  vast 
majority  of  the  total  AuM,  to  EUR  1.2  billion  and  EUR  950  million  respectively.  For 
Italian ELTIFs this amount was equal to EUR 222 million and for Spanish ELTIFs only 
EUR 28 million (see Annex 6 for more information on the ELTIF segment).20  

Based  on  the  data  available  in  the  AIFMD  database  and  additional  analysis  of  ELTIF 
portfolio  composition  by  ESMA  as  of  February  2021,  60%  of  the  total  AuM  was 
invested in loans granted to qualifying undertakings, and roughly 11% of the total AuM 
was  invested  in  equity  and  6%  in  non-investment  grade  corporate  bonds.  The  rest  was 
made  up  by  cash  and  cash  equivalents,  including  in  foreign  currencies  for  hedging 
purposes.21 

ESMA  Statistical  Report 

19  
https://www.esma.europa.eu/sites/default/files/library/esma50-165-1734_asr_aif_2021.pdf (7 June 2021). 
20  
21  

See ESMA ELTIF register and survey. ESMA34-46-103, pages 2 and 3.  
See Footnote 18. 

2021.  EU  Alternative 

Investment  Funds, 

page 

6. 

Source: 

8 

 
 
 
 
 
 
 
  
 
                                                           
As  of  April  2021,  all  ELTIFs  were  domiciled  in  only  four  Member  states  (France, 
Luxembourg,  Italy  and  Spain).  While  some  ELTIFs  were  marketed  in  more  than  one 
Member State, most ELTIFs were solely marketed in the Member State of their domicile 
(see Annex 6). 

Certain characteristics of the above description of the ELTIF market (i.e low number of 
funds,  small  net  asset  size,  few  jurisdictions  in  which  ELTIFs  are  domiciled,  portfolio 
composition largely skewed towards only one eligible investment category) demonstrate 
the  concentrated  nature  of  the  market  both  geographically  and  in  terms  of  investment 
type.  

While there are indications of recent growth in the number of registered ELTIFs, albeit 
from a low basis from mid-2019 to mid-202122 (the recent growth in the number of new 
ELTIF authorisations is attributed to Italy (11 new ELTIFs), France (5 new ELTIFs) and 
Luxembourg (7 new ELTIFs)), however, this recent activity is not indicative of broader 
market  use  of  the  ELTIF  and  remains  below  the  desired  level.23  For  that  reason,  it  is 
important that the ELTIF review address the range of issues identified by stakeholders to 
encourage greater market take-up of these funds. 

The  current  sub-scale  nature  of  the  ELTIF  market  also  exhibits  significant  unlocked 
potential  in  the  legal  framework  with  a  view  to  effectively  contributing  to  the  real 
economy and the development of the CMU. 

The following table below summarises the main findings of the evaluation of the ELTIF 
regime with a clear focus on the answers to the evaluation questions: 

Table 1 – Evaluation of the ELTIF regime (key findings) 

Q 1 

Q 2 

Q 3 

Q 4 

Q 5 

Questions 
How  effective  has  the 
EU intervention been? 

How  efficient  has  the 
EU intervention been? 

How  relevant  is  the  EU 
intervention? 

How coherent is the EU 
intervention? 

What  is  the  EU-added 
value 
the  EU 
intervention? 

of 

Summary of the evaluation 
The  objectives  of  the  ELTIF  Regulation  to  establish  a  single  market  for 
ELTIFs  has  not  been  achieved  entirely.  The  market  remains  underdeveloped. 
The  EU  ELTIF  regime  has  not  achieved  its  full  potential  to  become  a  fund 
vehicle of choice for financing long-term projects in Europe. 
ELTIF  rules  regarding  the  establishment  and  the  marketing  of  ELTIFs  have 
proved  to  be  generally  cost-effective.  However,  the  one-size-fits-all  approach 
to the fund rules for both retail and institutional investors combined with overly 
restrictive fund rules limit the utility of ELTIFs.  
The original rules remain relevant and provide for a strong legal foundation for 
a  well-regulated  and  transparent  legal  regime  for  a  passportable  financial 
product  available  to  both  professional  and  retail  investors.  The  original 
objectives of the ELTIF Regulation correspond to the current needs within the 
EU (financing of long-term projects) but require recalibration on the fund rules 
side. 
The rules set out in the ELTIF Regulation are coherent with other pieces of EU 
legislation.  ELTIFs  are  a  sub-set  of  AIFs  which  links  ELTIFs  to  the  AIFMD 
framework.  
The clear added value of the ELTIF Regulation is to realise its full potential to 
channel  finance  to  long-term  projects  and  meeting  the  needs  of  retail  and 
professional investors while enabling the cross-border marketing of funds that 
are well-suited for a range of long-term projects. 

22  
When the ELTIF review has started in mid-2019, there were around 20 ELTIFs in existence. In March 2020, 
ESMA has compiled a list of all authorised ELTIFs which has referred to 28 authorised ELTIFs. As on October 2021, 
the ELTIF register contained 57 ELTIFs. 
23  
No projections can be made on whether new ELTIFs would be domiciled in new jurisdictions (those beyond 
France,  Luxembourg,  Italy  or  Spain),  and  anticipate  the  total  number  of  funds  and  the  net  asset  size  of  the  ELTIF 
industry going forward. 

9 

 
 
 
 
 
 
 
 
                                                           
Additional  information  on  the  evaluation  of  the  functioning  of  the  ELTIF  framework 
could be found in Annex 5 hereto.  

Annex  2  sets  out  the  stakeholder  feedback  in  detail.  This  feedback  highlights  market 
concern  at  the  overly  restrictive  provisions  in  the  ELTIF  framework  that  limit  its 
effectiveness  and  utility  for  both  retail  and  professional  investors  to  access  ELTIFs.  In 
particular,  the  barriers  to  entry  for  retail  investors  and  the  exposure  thresholds  have 
proven  to  be  overly  restrictive  and  prevent  the  average  retail  investor  from  accessing 
ELTIF products.  In addition, overly restrictive fund rules limit the available investment 
universe,  fund  structures  and  available  strategies.  Some  of  these  restrictions  limit  the 
ability  to  develop  strategies  for  ELTIFs  and  access  a  sufficient  range  of  eligible 
investments.  

2.2. 

Problem tree overview 

Since  the  global  economic  and  financial  crisis,  the  EU  has  suffered  from  low  levels  of 
investment,  in  particular  sources  of  long-term  capital.  The  ELTIF  regime  is  uniquely 
positioned to provide this type of financing given the current low to negative interest rate 
environment, the resilience of ELTIFs to liquidity shocks as experienced in 2020 and the 
need  to  deploy  capital  and  savings  into  less  liquid  assets  to  support  the  real  economy, 
fund  large  infrastructure  projects,  create  employment  and  support  the  shift  to  carbon 
neutral economies by investing in new technologies and green power generation. At the 
same  time,  the  economic  impact  and  cost  of  the  Covid-19  pandemic  have  reduced  the 
capacity  for  government  spending in  these  areas creating an opportunity for  ELTIFs to 
step into this space and provide market financing to support these projects. 

However, the market for ELTIFs has failed to scale up significantly since the entry into 
force of the Regulation. With only 57 authorised ELTIFs managing approximately EUR 
2.4 billion in assets and despite being a relatively recent framework, it is evident that the 
ELTIF  regime  has  failed  to  achieve  mainstream  market  appeal  and  realise  its  full 
potential to channel capital financing to long-term investments in the EU.  In its current 
state,  the  ELTIF  is  also  not  supporting  to  the  extent  possible  the  development  of  the 
CMU, the European Green Deal and the pandemic recovery. 

While  a  certain  degree  of  new  market  growth  as  set  out  above  has  been  identified 
(see Annex  2),  the  ongoing  lack  of  significant  market  development  and  the  limited 
offering of ELTIF products necessitates further examination to determine its causes and 
identify  potential  solutions  to  improve  market  adoption  of  ELTIFs  by  both  fund 
managers and investors.  

The following problem tree summarises the problem drivers, problems and consequences 
under consideration: 

10 

 
 
 
 
 
 
 
 
 
Graph 1 – Problem tree 

Demand-side drivers 

Supply-side drivers 

ELTIF fund rules impose unnecessary 
restrictions making it difficult and less 
appealing for investors to access ELTIFs 

Overly restrictive ELTIF fund rules 
limit the available investment 
universe, fund structures and 
available strategies  

Problem 
Drivers 

Low uptake of ELTIFs in the EU  

Problems 

Fewer investors have access to and 
invest in ELTIFs 

European long-term projects are not 
benefitting from ELTIF financing to the 
fullest extent possible 

Conse-
quences 

In line with  the problem  tree, the section below  summarises and presents  the problems 
faced in the context of the ELTIF regime by asset managers, as well as by investors.  

2.3. 

Problems 

The core problem is the failure of the market for ELTIFs scale up both in terms of the 
number of funds and in terms of net assets. The low uptake by fund managers limits the 
contribution of the ELTIF to the real economy and the goals of the CMU while investors 
may not be able to access long term investment products that meet their financial needs. 

The  skew  in  the  overall  portfolio  allocation  by  ELTIFs  exposes  the  problem  that  –  by 
deduction - certain eligible assets, such as real assets or other eligible investment funds 
(ELTIFs,  EuSEFs  and  EuVECAs)  are  virtually  not  represented  among  those  eligible 
assets in which ELTIFs may invest.  

In  this  context,  ELTIFs  co-exist  in  parallel  to  other  EU  investment  funds  frameworks, 
including  the  AIFs  managed  by  the  AIFMs,  national  fund  vehicles  regulated  under 
national  laws of the EU  Member States,  and partially with  EuVECAs and EuSEFs and 
even the private equity investments used for structuring certain long-term projects.24 

The  potential  attractiveness  of  other  legal  fund  frameworks,  as  well  as  the  sub-optimal 
functioning  of  the  ELTIF  framework  is  linked  to  the  insufficient  interest  among  asset 
managers in establishing ELTIFs. Given the overly restrictive fund rules and the burden 
of the entry barriers for retail investors, managers may choose to use AIFs even though 
the  ELTIF  offers  certain  distinct  advantages  over  those  funds.  These  advantages  are 
outweighed by the limitations of the framework.  

24  
The  availability  of  other  fund  regimes  (such  as  a  mainstream  AIFMD  regime  or  sub-segments  thereof  or 
national fund structures) is an important factor that should not be seen as per se diminishing the attractiveness or the 
effectiveness  of  the  ELTIF  framework.  Instead,  such  regimes  are  complementary  in  providing  a  range  of  regulatory 
and market possibilities for facilitating the channelling of non-bank financing to real economy. 

11 

 
 
 
 
 
 
 
 
                                                           
 
 
 
 
 
 
2.4. 

Problem drivers 

2.4.1.   Demand-side drivers  

The  key  demand-side  driver  is  that  ELTIF  rules  impose  restrictions  making  it  difficult 
and less appealing for both retail and professional investors to access ELTIFs. 

The analysis of the functioning of the ELTIF Regulation (see the evaluation in Annex 5) 
has exposed specific ELTIF rules that contain explicit limitations that have the effect of 
dissuading investments by retail investors. 

The  current  ELTIF  rules  create  significant  barriers  to  entry  for  retail  investors,  such  as 
the  need  to  clarify  the  ELTIF  requirements  for  the  assessment  of  retail  investor’s 
knowledge  and  experience  and  align  with  the  requirements  in  MiFID  II  framework. 
Current provisions of the Regulation notably require fund managers to assess whether the 
ELTIF is suitable for marketing to retail investors and conduct a suitability test to assess 
the  retail  investor's  knowledge  and  experience,  general  financial  situation  and  their 
investment objectives 

The EUR 10,000 minimum initial investment participation (the so-called “entry ticket”) 
and  the  10%  limitation  on  aggregate  investment  for  investors  whose  portfolio  does  not 
exceed EUR 500,000  required by the ELTIF Regulation  constitute a tangible barrier  to 
the access of retail investors. It should also be noted that the 10% threshold is applied on 
an  aggregate  level.  This  means  that  the  total  (aggregate)  amount  allocated  by  retail 
investors  to  ELTIFs,  as  part  of  their  financial  portfolio,  should  not  exceed  10%  of  the 
investor’s portfolio. The ELTIF Regulation justifies the existence of such thresholds and 
limitations  with  the  imperative  of  strengthening  the  protection  of  retail  investors  (see 
Recital 46 of the ELTIF Regulation).  

It  should,  however,  be  recognised  that  both  the  EUR  10,000  minimum  entry  ticket  in 
combination  with  the  10%  aggregate  maximum  exposure  while  ostensibly  for  investor 
protection represent a significant obstacle for the average retail investor and conflict with 
the original goal of the ELTIF to establish a retail AIF product.  

Investors  face the disproportionately  high hurdle  of investing  a considerable amount of 
one’s  disposable  income,  relative  to  one’s  savings,  into  one  illiquid  financial  product 
which cannot be redeemed over a long period of time. Even where an investor can invest 
EUR 10,000 to  an ELTIF, investing in  other ELTIFs would  prove more  difficult  given 
the  application  of  the  minimum  entry  ticket  in  conjunction  with  the  10%  aggregate 
threshold.25 

2.4.2.   Supply-side drivers 

The  key  supply-side  problem  drivers  are  overly  restrictive  fund  rules  that  limit  the 
available investment universe, fund structures and available  investment strategies. Such 

25  
One  could  envisage  a  scenario,  where  a  retail  investor  with  a  financial  portfolio  of  EUR  180,000  has 
acquired  a  EUR  10,000  worth  of  shares  or  units  of  an  ELTIF.  Such  an  investor  would  therefore  be  prevented  from 
purchasing any other ELTIFs since it may, in aggregate, purchase EUR 18,000 or 10% of its total portfolio of ELTIFs. 
However,  by  purchasing  the  first  ELTIF,  the  investor  would  have  no  “quota”  left  in  allocating  the  remaining  EUR 
8,000 to purchasing another ELTIF due to the EUR 10,000 minimum investment ticket requirement. 

12 

 
 
 
 
 
 
 
 
 
 
                                                           
restrictive  provisions  in  the  ELTIF  framework  reduce  the  attractiveness  for  asset 
managers  for  establishing  ELTIFs  as  indicated  in  the  evaluation  and  stakeholder 
feedback.  

A  fund  manager’s  decision  to  establish,  market  and  manage  an  investment  fund  is 
influenced  by  market-driven  considerations  (such  as  the  attractiveness  of  the  local 
market,  prospective  investor  demand,  availability  of  eligible  assets,  distribution 
networks, etc.) and regulatory considerations (choice of the jurisdiction of domicile, fund 
rules,  jurisdictions  where  the  fund  will  be  marketed,  etc.).  In  particular,  when  asset 
managers  decide  on  the  choice  of  the  legal  framework  for  the  incorporation  of  the 
investment fund they consider, among other factors, to what extent the underlying fund 
rules are well-adapted to support the purported investment strategy pursued by the asset 
manager.26  This  flexibility  of  fund  rules  should  ideally  allow  asset  managers  to  pursue 
different investment strategies across a variety of asset classes27.  

However,  every  investment  strategy  and  every  investment  project  will  have  its  unique 
characteristics, maturity profile, risk and reward profile and would often require distinct 
fund  rules  adapted  to  specific  circumstances,  identified  investor  demand,  expected 
liquidity profile and other investment factors.  

In  this  connection,  as  the  evaluation  confirms,  the  fund  rules  set  out  in  the  ELTIF 
regulatory  regime  appear  to  be  excessively  restrictive  and  prevent  managers  from 
pursuing a wider range of existing investment strategies that could otherwise be used to 
channel financing into long-term investment projects.  In particular, certain ELTIF rules 
contain  strict  limitations  that  make  the  functioning  of  the  ELTIFs  inefficient, 
impracticable or unviable and in certain cases less attractive for the investment manager 
than the readily available AIF structures. 

Stakeholders have highlighted these issues with the functioning of the ELTIF framework 
through  the  open  public  consultation  (see  Annex  2)  and  during  subsequent  bilateral 
consultations with a wide range of market participants and NCAs. Whilst different types 
of  stakeholders  prioritise  the  importance  of  different  fund  rules,  the  most  important 
factors  appear  to  focus  on  the  outright  limitations  in  the  scope  of  eligible  assets  and 
investments, restrictive fund rules on the borrowing of cash, and requirements regarding 
diversification and portfolio composition requirements and concentration limits (see the 
evaluation of the ELTIF Regulation, Annex 5). 

A  fund  manager’s  decision  to  establish,  market  and  manage  an  investment  fund  is 
equally influenced by the category of investors to which units or shares of ELTIFs can be 
marketed.28 These considerations are important for AIFMs because they may determine 
their  market  potential,  the  level  of  investor  demand  for  the  product,  its  marketing 
strategy,  the  optimal  portfolio  composition  and  costs  associated  thereto.  The  fund 
structure (vis-à-vis eligible investors) will also determine distribution-related aspects and 
other  applicable  regulatory  requirements,  such  as  the  possibility  for  a  two-week 

26  
As  discussed  in  Section  2.1.1  (a),  a  fund  manager’s  decision  to  set  up,  market  and  manage  an  investment 
fund is influenced by a range of market considerations and regulatory considerations, in which the flexibility of fund 
rules is an important factor. 
27  
For  instance,  investments  in  real  assets,  like  smart  grid,  energy  efficiency  projects  or  high-speed  railway 
infrastructure, investments in subordinated corporate debt of innovative SMEs in a particular geographical region, or 
outright equity investments in a listed and non-listed companies developing advanced carbon capture technology. 
28  
or a mix of both retail and professional investors. 

ELTIFs could, at least theoretically, be marketed solely to professional investors or solely to retail investors, 

13 

 
 
 
 
 
 
                                                           
withdrawal window for retail investors and the requirement to provide a Key Information 
Document (KID) for retail investors.  

In this  connection, it should  be noted that the ELTIF Regulation  applies  the same fund 
rules  for  both  professional  and  retail  investors  including  restrictions  on  the  use  of 
leverage, diversification and portfolio composition requirements, concentration rules and 
limits on the eligible assets and investments. This means that all AIFMs when choosing 
the ELTIF structure as a possible vehicle of choice for setting an investment vehicle must 
comply  with  a  “one-size-fits-all”  set  of  fund  rules  irrespective  of  the  targeted  client 
group,  preferred  investment  strategy,  and  the  risk  profile  of  the  underlying  portfolio 
assets.29  

Same fund rules for both  professional  and retail investors seem  to  serve  a  very distinct 
category of investors with  different  time horizons, risk tolerance and investment  needs, 
which may be seen as impairing the ability of managers to offer tailored products. 

In  addition,  the  participation  of  retail  investors  in  an  ELTIF  may  often  lead  to  higher 
administrative  burdens  and  associated  costs  for  ELTIF  managers  compared  to  those 
ELTIFs that can be solely  marketed to professional investors. While these burdens may 
appear to be largely administrative and compliance-driven (a requirement to publishing a 
Key  Information  Document  under  the  PRIIPS  Regulation,  a  2-week  withdrawal  right 
without  a  penalty,  extra  procedures  and  staff  to  deal  with  any  complaints  by  retail 
investors,  a  requirement  for  the  nomination  and  contract  documentation  with  a 
depositary,  etc.),  these  fund  rules  have  been  consistently  flagged  to  the  Commission 
services  as  detracting  from  the  attractiveness  of  ELTIFs  when  the  intention  is  to  only 
market to professional investors.30  

2.4.4.  Out-of-scope problem drivers 

There are other significant  problem  drivers that impact  on the attractiveness  of ELTIFs 
but that are outside of the scope of the Commission’s review. 

Taxation – A number of industry representatives and asset managers responding to the 
open consultation pointed to taxation as an important barrier. Respondents reported that 
investment  funds  often  lack  or  have  difficulties  with  obtaining  access  to  double  tax 
treaties, due to their tax status in the territory where they are domiciled or because they 
cannot  demonstrate  that  their  investors  meet  particular  residence  or  nationality 
requirements.31  When  they  did  have  access  to  double  tax  treaties,  respondents  reported 

29  
As an illustration, an ELTIF manager could have a limited capacity to opt for more concentrated portfolios 
(say, investing in subordinated debt to two qualifying SME undertakings) or using higher leverage (beyond the current 
30%  limit  set  out  in  the  ELTIF  regime)  despite  specific  preferences  and  despite  the  fact  that  more  focused  asset 
allocation  and  higher  leverage  would  allow  that  asset  manager  to  set  up  an  ELTIF  that  would  otherwise  be  fully 
appropriate and suitable to the needs of such institutional investors, the manager would not be permitted to structure 
the fund in this way preventing them from meeting their clients requirements under the ELTIF. This means that many 
managers instead choose to use standard AIFs instead. 
30  
In  its  letter  to  the  Commission  dated  3  February  2021,  ESMA  also  highlighted  its  concerns  regarding  the 
one-size-fits-all  approach  of  the  ELTIF  framework  “In  this  context,  it  should also be  noted that Article  30(4)  of  the 
ELTIF Regulation (equal treatment of all investors), if interpreted strictly, could imply that no specific share classes 
can be launched within an ELTIF opened to retail investors. In that case, professional investors would be dissuaded to 
invest in an ELTIF opened to retail investors as they would have to pay the same percentage/amount of fees than retail 
investors although their subscriptions are generally much higher”. 
31  
It  should  be  noted  that  this  third  category  of  the  possible  Member  State  incentives  such  as  tax  reliefs  are 
outside the mandate of the European Commission due to the powers stemming from the EU Treaties, and will hence 
not be addressed in the present initiative. 

14 

 
 
 
 
 
 
 
                                                           
difficulties  due  to  inconsistent  and  burdensome  withholding  tax  recovery  procedures, 
which  are  defined  and  applied  at  a  national  level.32  Other  tax  issues  highlighted  by 
industry  respondents  and  investors  were  diverging  national  tax  reporting  requirements, 
which discourages (retail) investors from investing cross-border.33 
Taxation barriers are out of scope of this initiative as these would need to be addressed 
on  a  different  treaty  base  and  are  the  subject  of  other  Commission  work  streams.  This 
includes the work with national tax experts, which has led in 2017 to the publication of a 
Code  of  Conduct  on  Withholding  Tax34  on  more  efficient  withholding  tax  relief  and 
refund principles as part of the CMU Action Plan.  

The High-Level Forum on the CMU has explicitly addressed taxation related concerns in 
its  recommendations  in  relation  to  the  ELTIF  review.35  The  HLF  on  CMU  also 
recommends  (see  Recommendation  15)  to  introduce  a  relief  at  source  system  for 
withholding tax procedures at EU level in the same vein as the Action Plan for fair and 
simple  taxation  supporting  the  recovery  strategy.36  However,  the  Report  has  explicitly 
acknowledged that taxation related issues must be solved at national level.37 

Despite  the  fact  that  tax-related  issues  fall  outside  the  scope  of  the  ELTIF  review 
initiative, it could be considered that national taxation plays a relatively important, albeit 
a  non-decisive  role  in  the  uptake  of  ELTIFs  in  general.38  Taxation-related  aspects  are 
analysed  by  asset  managers  amongst  many  economic,  regulatory,  financial,  accounting 
and marketing considerations. The presence of tax incentives, when taken in aggregate, 
may lead to a specific feature design or marketing to a specific category of investors who 
may find it attractive to invest in a product due to a combination of economic, financial 
and investment aspects. The design of financial products is very rarely dictated solely by 
tax-related considerations.  

for 

and 

Fair 

Plan 

Task 

Action 

Simpler 

Taxation. 

Commission. 

32  
Inefficient withholding tax procedures on passive income payments has been a long-standing barrier for the 
well-functioning of the CMU and, in general, for the free movement of capitals. The Commission services are working 
on  a  solution, pursuant  to  Action  8  of  the  Action Plan  for  fair  and  simple  taxation  supporting  the recovery  strategy. 
Source: 
European 
https://ec.europa.eu/taxation_customs/general-information-taxation/eu-tax-policy-strategy/package-fair-and-simple-
taxation_en (18 May 2021). 
33  
In this connection, it should be noted that an attractive taxation regime is an important factor affecting the 
attractiveness of investments in investment funds in general. In the context of the  ELTIF review, many stakeholders, 
including the High-Level Forum on the CMU experts have flagged the availability of favourable taxation regime and 
the elimination (or more favourable) withholding tax as potentially creating incentives for investments in ELTIFs. To 
support this argument, one should mention a relative uptake in Italian-domiciled ELTIFs, albeit from a low base, which 
have largely been linked to the adoption in 2019 of the Law Decree DL34/2019 (Growth Decree) seeking to improve 
the  competitiveness  of  Italian  companies,  creating  long-term  economic  growth  and  supporting  new  investments  and 
employment. This Decree creates tax incentives for investors in Italian ELTIFs and, based on the feedback by some 
stakeholders, is a cornerstone of the increased fund activity in this area in Italy. 
34  
on 
https://ec.europa.eu/taxation_customs/sites/taxation/files/code_of_conduct_on_witholding_tax.pdf (28 April 2021). 
35  
Notably, the Report has lamented that “by introducing targeted amendments to the ELTIFs regime, ELTIFs 
should  become  a  coherent  and  stable  product  profile  for  investors  to  invest  in.  Nonetheless,  specific  national 
considerations,  among  which  is  tax,  will  continue  to  impinge  on  this.  In  view  of  the  long-term  nature  of  the 
investments, a favourable tax treatment of ELTIFs (no tax on dividends or capital gains) should be granted across EU 
jurisdictions. In order to render ELTIFs investments more attractive a favourable tax treatment could be considered at 
Member State level”. Ibid, page 39. 
36  
See Footnote 7. 
37  
Notably “Any change in tax treatment (introduction of tax incentives) could only be done at a Member State 
level. The Commission has no competence to table a proposal to that effect. The success of this recommendation would 
therefore depend on the good will and agreement of the Member States to follow up on this”. See Ibid, page 40. 
38  
Favourable  national  taxation  regimes  clearly  play  an  important  role  when  investors  are  evaluating  their 
available investment products. In this respect, it is important to note that this issue is not unique to ELTIFs and would 
equally apply to any other investment product. 

Commission. 

Withholding 

European 

Conduct 

Source: 

Code 

Tax. 

of 

15 

 
 
 
 
                                                           
 
It  is  difficult  to  quantify  exactly  the  relative  role  of  national  taxation  in  the  growth 
potential  of  the  ELTIF  market  as  a  sub-segment  of  AIFs.  However,  as  part  of  its  2019 
‘Growth  Decree’,  Italy  introduced  a  range  of  tax  measures  to  support  investment  and 
increase  the  access  of  Italian  companies  to  alternative  sources  of  finance,  particularly 
through ELTIFs.39 Despite the growth of Italian ELTIFs from two funds in the beginning 
of 2020 to 13 ELTIFs in mid-2021, it remains difficult to conclude with certainty if there 
is  a  legitimate  or  only  circumstantial  causal  link  between  the  Growth  Decree  and  the 
growth of the Italian ELTIF industry. 

Against this background, and in the absence of the legal mandate to propose measures in 
the  taxation  area  under  Article  144  of  the  Treaty  on  the  Functioning  of  the  EU,  the 
ELTIF review cannot propose any measures on tax-related issues. 

Solvency  II  rules  and  prudential  treatment  of  ELTIFs  –  During  the  open  public 
consultation  several  stakeholders  advocated  for  a  review  of  the  Solvency  II  rules.  In 
addition,  the  High-Level  Forum  on  the  CMU  report  recommended  the  promotion  of 
institutional  investor  take  up  and  to  “consider  explicit  recognition  of  the  ELTIF  in 
relevant  capital  frameworks  (e.g.  Solvency  II  for  insurers),  and  provide  appropriate 
flexibility  for  investment  strategies  attractive  to  institutional  investors  to  be  addressed 
within the ELTIF framework”.40 This topic is beyond the scope of the ELTIF Regulation, 
and can only be appropriately addressed in the context of the review of the Solvency II 
framework and other EU legal  acts  governing the prudential  treatment  of certain  assets 
(also see Section 2.3. of Annex 5)41. These topics are also being discussed, in parallel, at 
the level of the European Supervisory Authorities.42   

Investors’ behaviour – The broader issue of (retail) investors' behaviour is out of scope 
as  this  cannot  be  addressed  through  this  targeted  initiative.  Economic  research  has 
demonstrated  that  fund  investors  are  subject  to  several  behavioural  biases,  including 
home and familiarity bias. It has been argued that investors might be willing to buy high 
fee  funds  with  which  they  have  become  familiar,  possibly  through  localized  marketing 
efforts.  Recent  legislative  initiatives,  like  PRIIPs,  already  aim  to  address  investors' 
behaviour more broadly by providing simpler and comparable information on investment 
products, which is expected to significantly improve investors’ decisions. 

39  
The fact that a Member State deemed it both appropriate and desirable to introduce such a taxation measure 
clearly demonstrates the value of ELTIFs as a source of finance for SMEs and the broader real economy. Whilst the 
direct  causal  link  cannot  yet  be  fully  demonstrated  with  confidence,  this  treatment  has  contributed  to  the  growth  of 
Italian ELTIFs industry from solely two funds in the beginning of 2020 to 13 ELTIFs in mid-2021. 
40  
Ibid, page 37. 
41  
For  instance,  for  the  purpose  of  capital  requirements,  Solvency  II  framework  already  treats  ELTIF  more 
favourably than the average private equity or unlisted equity by (a) using the same capital charge as for listed equity 
(i.e. 39% instead of 49%) and (b) having a simpler access to the preferential treatment for long-term equity investments 
(i.e. 22%) as the criteria to be met are assessed at the level of the ELTIF fund and not the underlying assets. The HLF 
(and CMU AP) acknowledges that as regards S2 and equity investments, the main issue is to facilitate the criteria for 
LTE  which  are  difficult  to  be  met.  The  COM  committed  to  review  the  criteria  in  the  CMU  Action  Plan  and  by 
delivering on this commitment, ability of ELTIFs to benefit from the 22% treatment may also effectively be extended 
going forward. 
42  
Notably, one of the topics covered by EIOPA in its review is the assessment of the equity risk and the review 
of  the  criteria  for  the  ability  to  hold  equity  long-term,  by  making  a  link  with  long-term  illiquid  liabilities.  Source: 
https://www.eiopa.europa.eu/content/opinion-2020-review-of-solvency-ii_en  (28  April  2021).  At  the  same  time, 
certain provisions of the Commission Delegated Regulation (EU) 2015/35, in particular Article 171a(2) provide useful 
clarifications that where equities are held within ELTIFs [i.e. collective investment undertakings or within alternative 
investment  funds  referred  to  in  points  (a)  to  (d)  of  Article  168(6)],  the  conditions  for  the  treatment  of  long-term 
investments set out in paragraph 1 of Article 171a may be assessed at the level of the funds and not of the underlying 
assets  held  within 
those  funds.  Source:  http://publications.europa.eu/resource/cellar/a155174b-d6be-11ea-adf7-
01aa75ed71a1.0007.02/DOC_1 (28 April 2021). 

16 

 
 
 
 
                                                           
 
Miscellaneous  –  Based  on  the  feedback  to  the  consultations  with  market  participants, 
there  are  other  ancillary  factors  that  may  provide  certain  disincentives  to  the  effective 
functioning  of  the  ELTIF  framework.  These  include  the  impact  of  vertical  distribution 
channels  and  cultural  preferences  for  domestic  products  (home  and  familiarity  bias). 
However,  these  factors  are  outside  the  scope  of  the  ELTIF  framework  and  cannot  be 
addressed through regulatory measures. 

2.4.3.  Relative Importance of the identified problems 

Demand-side  and  supply-side  related  considerations  are  closely  inter-connected.  With 
fewer  investors  having  access  to  and  investing  in  ELTIFs,  asset  managers  have  no 
economic incentive to  manufacture and market  new financial products,  and conversely, 
lack of high-quality retail financial products will reduce the number of investors and the 
total amount of invested funds.  

Nevertheless,  based  on  the  extensive  feedback  of  market  participants,  supply-side 
drivers,  i.e.  overly  restrictive  ELTIF  fund  rules  limiting  the  available  investment 
universe,  fund  structures  and  available  strategies,  were  generally  perceived  as  more 
important  and  burdensome  as  demand-side  drivers  (i.e.  ELTIF  fund  rules  imposing 
unnecessary  restrictions  making  it  difficult  and  less  appealing  for  investors  to  access 
ELTIFs). 

Furthermore, the voluntary nature of the ELTIFs and the availability of other regulatory 
alternatives  for  asset  managers  in  choosing  the  vehicle  for  structuring  an  investment 
fund, such  as  AIFs under the AIFMD license or  existing national  fund structures, have 
amplified  the  relative  importance  of  supply-side  fund  rules  and  related  considerations. 
As  an  illustration,  limited  scope  of  eligible  assets  (or,  a  mere  uncertainty  in  the  legal 
definitions) or lack of flexibility on the execution of co-investment strategies which are 
customarily  required  by  virtue  of  the  standard  asset  management  mandate  by  leading 
alternative  asset  managers,  have  been  referred  as  frequent  reasons  that  have  prevented 
well-established  AIFMs  from  opting  for  ELTIFs  as  a  go-to  regulatory  vehicle  for 
structuring  long-term  investments.  At  the  same  time,  the  possibility  for  passporting 
ELTIFs  across  the  EU  has  relatively  increased  the  appeal  of  this  legal  framework 
compared to other fund frameworks.     

2.5. 

Consequences 

2.5.1.  Fewer investors have access to and invest in ELTIFs 

Greater participation in capital markets and investor appetite for getting exposure to less 
liquid investments, such as private equity and debt are clear industry trends. The ELTIF 
framework has the potential to allow retail investors to participate more actively in these 
sectors of the economy while still ensuring effective levels of protection.  

ELTIFs  are  a  well-suited  and  well-regulated  investment  vehicle  for  both  mass  affluent 
investors and retail investors in Europe to diversify their investment portfolios into  less 
liquid long-term assets. As highlighted in the 2020 CMU Action Plan,  investors should 
be  encouraged  to  supplement  public  pensions  with  life-long  saving  and  investment.  In 
some cases, ELTIF could be a vehicle to help ensure pension adequacy while supporting 

17 

 
 
 
 
 
 
 
 
 
 
the development of Europe’s economy and the post-Covid19 pandemic recovery. But this 
opportunity  to  harness  and  grow  on  the  back  of  general  market  trends  is  not  being 
realised.  An  important  factor  in  this  sub-scale  realisation  of  ELTIFs’  potential  is  that 
fewer  investors  have  access  and  invest  in  ELTIFs  than  would  otherwise  be  possible 
without supply and demand-side drivers described above (see Section 2.3.). 

Given  the  fact  that  ELTIFs  are  essentially  closed-end  funds  where  any  investment  is 
typically  locked-up  during  the  life  of  the  fund,  a  commitment  (the  entry  ticket  size)  of 
EUR  10,000  may  limit  retail  investor’s  potential  interest  in  ELTIF  structures.  That  is 
mainly  because  a  EUR  10,000  may,  in  many  instances,  constitute  a  much  larger 
proportion  of  investor’s  disposable  income  (and  of  investor’s  investment  portfolio). 
These investors may often prefer to increase their investment positions gradually, without 
a substantial up-front commitment.  

In addition, the 10% aggregate threshold would ex ante limit investor’s capacity to obtain 
exposure  to  several  ELTIFs  even  when  the  risk  tolerance,  financial  situation  and  other 
personal  and  financial  characteristics  of  the  investor’s  portfolio  and  personal  situation 
would  –  in  the  overall  portfolio  context  –  make  investments  in  ELTIFs  a  highly 
appropriate and suitable investment. Furthermore, these restrictions constitute additional 
administrative  burdens  on  asset  managers  and  distributors,  who  have  to  ensure 
compliance  with  these  requirements,  which  may  sometimes  be  difficult  to  enforce  and 
validate. 

As  a  result,  retail  investors  may  often  decide  to  forego  an  investment  in  ELTIFs 
altogether,  opting  instead  for  other  financial  products,  such  as  UCITS,  national  fund 
structures,  AIFs  marketed  within  a  Member  State,  etc.  and  hence  depriving  investors 
from exposure to long-maturity sustainable assets which ELTIFs tend to include in their 
portfolios.  This  also  undermines  one  of  the  fundamental  objectives  of  the  original 
proposal. 

In  this  connection,  smaller  amounts  of  financing  are  channelled  by  ELTIFs  by  fewer 
investors and to fewer long-term projects than if ELTIFs were more commonly used as a 
vehicle of choice for long-term financing of projects in Europe.43  

2.5.2.  European  long-term  projects  are  not  benefitting  from  ELTIF  financing  to 

the fullest extent possible 

While still a relatively new framework, it is evident that the ELTIF has failed to achieve 
mainstream  market  appeal  and  realise  its  full  potential  to  channel  capital  financing  to 
long-term investments in the EU. It is therefore obvious that small number of authorised 
ELTIFs is linked to a small number of net assets, which is translated into fewer long-term 
projects getting financing channelled via ELTIFs.44 

43  
One  cannot  draw  a  definitive  conclusion  that  such  long-term  initiatives  were  permanently  deprived  of 
financing.  Instead,  a  more  plausible  context  is  that  long-term  projects  that  were  otherwise  eligible  for  financing  by 
ELTIFs  were  instead  financed  by  alternative  means,  such  as  bank  lending,  bonds  or  equity  issuance,  recourse  to 
financing by EU AIFs or other investment fund structures, etc. 
44  
According to the ELTIF statistics submitted by ESMA, only 57 ELTIFs were authorised as of October 2021. 
Moreover, all such ELTIFs manage an aggregate size of below EUR 2 billion, which is relatively a very small amount 
of  assets  under  management  when  compared  to  the  overall  size  of  the  EU  AIF  industry  of  over  EUR  6.8  trillion. 
ESMA. 
Source: 
https://www.esma.europa.eu/sites/default/files/library/esma50-165-1734_asr_aif_2021.pdf (26 May 2021). 

Alternative 

Statistical 

Report. 

Annual 

ESMA 

Funds. 

EU 

18 

 
 
 
 
 
 
 
 
                                                           
The ELTIF is thereby also not supporting to the extent possible the development of the 
CMU,  the  European  Green  Deal,  post-Covid  pandemic  recovery  and  other  European 
policy initiatives. 

The low uptake of ELTIFs, in turn, could have diminished – to a degree which is difficult 
to precisely quantify – the availability of capital for those long-term projects in need of 
capital. This, in turn, could have made the financing of such long-term projects via other 
alternative  methods,  such  as  bank  financing  or  bond  issuance,  more  expensive 
(depending on the cost of capital and financing considerations) and potentially exposing 
project  owners  to  additional  risks  (the  need  of  additional  pledge  or  security,  financing 
conditions, etc.).45  

2.6. 

Potential problem evolution without EU action: the baseline scenario 

If no action were taken to reform the ELTIF regulatory regime, the original objectives of 
the  Regulation  will  remain  unfulfilled  and  the  utility  and  effectiveness  of  ELTIFs  for 
investment managers and investors would remain limited. That would leave the potential 
of the ELTIF framework to contribute to the development of the real economy and CMU 
unrealised. 

No  EU  action  in  this  area  would  lead  to  fewer  long-term  projects  being  funded  by 
ELTIFs  and,  in  aggregate,  smaller  amounts  of  funding  being  channelled  by  ELTIFs  to 
long-term projects (see Section 2.5.).46 Investors would also be unable to access a long-
term investment product to help bridge the gap to longer term saving needs. 

The  opportunity  costs  and  potential  cost-savings  that  could  have  been  generated  with 
financing  available  from  a  well-developed  ELTIF  industry  could  continue  making 
investments  in  long-term  projects  more  expensive  (or  otherwise  less  attractive),  when 
compared  to  a  situation  where  ELTIFs  are  turned  into  a  mature,  well-functioning 
investment  fund  segment.  Such  cost  savings  would  have  been  passed  on  to  the  project 
owners,  and  ultimately  the  beneficiaries  of  such  long-term  projects  (citizens,  societal 
benefits, etc.) and sustainable, green and smart European economy at large. 

Conversely,  access  to  high-quality  investment  projects  by  ELTIFs  could  make  it 
appealing for asset managers to  gain exposure to assets and thus offer ELTIF investors 
attractive long-term risk-adjusted returns. 47  

45  
The  precise  quantification  of  the  consequences  of  the  low  uptake  of  ELTIFs  and  the  opportunity  costs  of 
being left without ELTIF financing is difficult. Nevertheless, one could state that the effect  long-term projects failing 
to benefit from ELTIF financing to the fullest extent possible are clearly negative for both the funding opportunities of 
the long-term projects in question, as well as the real economy at large and the broader CMU. 
46  
The  ongoing  review  of  the  AIFMD  can  be  expected  to  partially  improve  the  overall  attractiveness  of  the 
ELTIF  regime.  Since  ELTIFs  are  a  subset  of  AIFs  by  definition,  they  will  also  benefit  from  the  reviewed  AIFMD 
rules. However, it is unlikely that the review of the AIFMD alone, without a comprehensive targeted amendment of the 
ELTIF framework would overcome the identified problems. 
47  
This argument and an evolution scenario of the problem evolution of the ELTIF market could be illustrated 
by the following market-driven development observed in the Italian ELTIF market. Notably, it is important to note an 
increase  throughout  2020  and  the  beginning  of  2021  in  the  number  of  registered  ELTIFs  domiciled  in  Italy.  This 
growth, albeit  moderate in absolute numbers, can be attributed to the adoption and entry into application in 2020 of 
Italy’s  tax  regime  that  favours  certain  investors  that  invest  in  Italian  domiciled  ELTIFs.  In  June  2019,  the  Italian 
government has approved the Law Decree DL34/2019 (Growth Decree) with the aim of improving the competitiveness 
of Italian companies, creating long-term economic growth and supporting new investments and employment. Since the 
introduction of the Italian taxation-incentives, the number of ELTIF authorisations has almost doubled (albeit from a 
low base, with 15 Italian ELTIFs currently accounting for a slightly less than a third of all ELTIFs registered in the EU 
as on April 2021). 

19 

 
 
 
 
 
 
                                                           
Finally,  without  further  EU  action  in  this  area  it  is  highly  likely  that  ELTIFs  would 
remain  a  sub-scale  and  under-developed  legal  framework  which  could  potentially  be 
characterised  by  few  new  ELTIFs  launched.  It  is  also  possible  that  EU  Member  States 
could choose to introduce sector-specific national fund frameworks to finance long term 
infrastructure  projects  or  to  fund  their  pandemic  recovery,  which  would  create  an  ever 
diverging range of national fund frameworks and further diminishing the relevance and 
the market acceptance of the ELTIF legal framework. Against this background, without 
EU  action,  ELTIFs  would  rarely  be  set  up  due  to  the  lack  of  obvious  appeal  for  asset 
managers  in  choosing  ELTIF  vehicle  for  structuring  their  investments  in  long-term 
projects.   

3. 

EU’S RIGHT TO ACT AND JUSTIFICATION 

3.1. 

Legal basis 

The  Treaty  on  the  Functioning  of  the  European  Union  (TFEU)  confers  upon  the 
European  institutions  the  competence  to  lay  down  appropriate  provisions  that  have  as 
their object the establishment and functioning of the internal market (Article 114 TFEU). 
In  this  connection,  it  should  be  noted  that  the  ELTIF  Regulation  clearly  refers  to  the 
availability  of  the  legal  basis  (Article  114  TFEU).  The  amendment  of  the  ELTIF 
Regulation would be based on the same legal basis. 

Notably, the legislative action to be examined would lay down uniform product rules on 
investment funds that are targeting long term assets. It aims to ensure that such funds are 
subject  to  consistent  rules  across  the  EU  and  that  they  are  more  easily  identified  by 
investors throughout the EU. At the same time it also aims to ensure a level playing field 
between different long term investment fund managers and establish uniform conditions 
for the operation of such funds. This proposal harmonises the operating conditions for all 
relevant players in the investment fund market  for the ultimate benefit of investors and 
the European economy.48 

3.2. 

Subsidiarity: Necessity of EU action 

Depending  on  the  policy  option  chosen  and  the  specific  design  of  the  rules,  the 
appropriate legal base could also be Article 53(1) TFEU on the taking-up and pursuing of 
activities  by  self-employed  persons,  which  is  used  to  regulate  financial  intermediaries, 
their  investment  services  and  activities.  Some  Member  States  have  put  in  place  (or  are 
considering)  bespoke  national  regimes  to  regulate  long-term  investment  funds.  These 

48  
Different  rules  that  vary  according  to  the  national  regulation  in  this  area  create  an  un-level  playing  field, 
erecting additional barriers to a Single Market in financial services and products. Member States  have already taken 
divergent and uncoordinated action to develop national fund regulation related to long term investment funds, and it is 
likely that this development will continue, even as the marketing and management passports contained in the AIFMD 
come  into  force.  Divergences  in  such  rules  increase  costs  and  uncertainties  for  fund  managers,  distributors,  and 
investors, and represent an impediment to the further cross-border development of the market for long term investment 
funds.  These  divergences  represent  an  obstacle  to  the  establishment  and  smooth  functioning  of  the  Single  Market. 
Consequently, the appropriate legal basis is Article 114 TFEU. 

20 

 
 
 
 
 
 
 
 
                                                           
national regimes can follow different approaches and create barriers to the cross-border 
provision of services in relation to long-term investments.49  

The ELTIF Regulation also explicitly recognises ELTIFs as a conduit for supporting the 
CMU.  EU  action  in  the  ELTIF  sector,  would  add  value  by  preventing  market 
fragmentation  through  national  regimes,  addressing  deficiencies  identified  in  the 
framework and promoting further market growth and liquidity. 

3.3. 

Subsidiarity: Added value of EU action 

In accordance with the ELTIF Regulation, ELTIFs are explicitly recognised as a conduit 
for supporting and completing the CMU by providing a source of long-term funding for 
the  real  economy  that  is  accessible  to  retail  investors.  The  objectives  of  the  ELTIF 
Regulation,  namely  to  ensure  uniform  requirements  on  the  investments  and  operating 
conditions  for  ELTIFs  throughout  the  Union,  while  taking  full  account  of  the  need  to 
balance the safety and reliability of ELTIFs with the efficient operation of the market for 
long-term  financing  and  the  cost  for  its  various  stakeholders,  cannot  be  sufficiently 
achieved by the Member States alone. 

Instead, it can due to their scale and effects be better achieved at Union level. The Union 
has  the  right  to  adopt  measures  in  accordance  with  the  principle  of  subsidiarity.  In 
accordance with the principle of proportionality, as set out in Article 5 of the Treaty on 
European  Union,  ELTIF  Regulation  does  not  go  beyond  what  is  necessary  in  order  to 
achieve those objectives (i.e. added value under the subsidiarity). 

4. 

OBJECTIVES: WHAT IS TO BE ACHIEVED? 

The  graph  below  provides  a  schematic  overview  of  the  objectives  purported  to  be 
achieved  by  the  review  initiative.  Such  specific  and  general  objectives  are  analysed  in 
Sections 4.1 and 4.2 below.  

Graph 2 – General and specific objectives 

Specific objective 1 

Specific objective 2 

Improve the attractiveness of the ELTIF 
regime for asset managers  

Facilitate access for retail investors while 
preserving investor protection 

General objectives 

Increase the size of the ELTIF market and the overall funding channelled via ELTIFs  

49  
This proliferation in national approaches also poses risks to the level playing  field in the Single Market in 
terms  of  investor/consumer  protection,  market  integrity  and  competition.  In  the  recognition  of  the  basis  for  the  EU 
intervention, Recital (52) of the ELTIF Regulation sets out “since the objectives of this Regulation, namely to ensure 
uniform requirements on the investments and operating conditions for ELTIFs throughout the Union, while taking full 
account of the need to balance safety and reliability of ELTIFs with the efficient operation of the market for long-term 
financing and the cost for its various stakeholders, cannot be sufficiently achieved by the Member States but can rather, 
by reason of their scale and effects, be better achieved at Union level, the Union may adopt measures in accordance 
with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union.”. 

21 

 
 
 
 
 
 
 
 
 
                                                           
 
 
 
4.1. 

General objectives 

The  general  objectives  of  the  ELTIF  regime  are  set  out  in  both  the  recitals  and  the 
enacting provisions of the ELTIF Regulation. The objective of the ELTIF framework is 
to  raise  and  channel  capital  towards  European  long-term  investments  in  the  real 
economy,  in  line  with  the  Union  objective  of  smart,  sustainable  and  inclusive  growth 
(Article  1(2)  of  the  ELTIF  Regulation).  Furthermore,  according  to  Recital  52  of  the 
ELTIF  Regulation,  these  objectives  comprise  ensuring  uniform  requirements  on  the 
investments and operating conditions for ELTIFs throughout the Union, and the need to 
balance  safety  and  reliability  of  ELTIFs  with  the  efficient  operation  of  the  market  for 
long-term financing and the cost for its stakeholders.  

The  ELTIF  review  initiative  would  not  change  the  initial  underlying  objectives  of  the 
ELTIF  regime.  The  focus  remains  on  targeted  amendments  to  the  current  fund 
restrictions and improve the attractiveness of ELTIFs for fund managers and investors to 
realise the full potential of ELTIFs as an effective conduit for channelling capital towards 
European long-term projects to the benefit of the European economy and complementing 
the CMU with an emphasis on smart, sustainable and inclusive investments.  

This  initiative  is  intended  to  tackle  those  challenges  in  meeting  the  above-mentioned 
objectives  and  ensuring  that  the  ELTIF  market  continues  its  growth  by  making  the 
ELTIF  regime  more  attractive  and  maximise  its  contribution  to  the  real  economy  and 
CMU while meeting investors’ needs.  

4.2. 

Specific objectives 

Specific  objective  of  this  initiative  should  be  analysed  through  the  lens  of  the 
effectiveness of the ELTIF framework and the attractiveness of the ELTIF fund rules for 
both asset managers and investors alike.  

  Specific  objective  1:  Improve  the  attractiveness  of  the  ELTIF  regime  for  asset 

managers 

Technical  changes  could  facilitate  the  broadening  of  the  scope  of  eligible  assets  and 
investments  and  removing  certain  fund  rules  limitations,  which  in  turn,  would  help 
increase the attractiveness of certain investment strategies and their appeal for investors. 
This,  in  turn,  would  make  it  economically  viable  and  financially  profitable  for  asset 
managers to launch new ELTIFs. 

  Specific  objective  2:  Facilitate  access  for  retail  investors  while  preserving 

investor protection 

Improving the access of retail investors (primarily targeting numerical hurdles for retail 
investors)  to  ELTIFs  in  a  manner  that  would  not  decrease  the  investor  protection  and 
preserve market integrity. Such investor safeguards (streamlining the suitability test and 
avoid  duplications  with  MiFID  II)  should,  in  combination  with  other  existing  investor 
protection measures, ensure greater number of retail investors investing in ELTIFs and a 

22 

 
 
 
 
 
 
 
 
 
 
 
 
larger  amount  of  funding  channelled  to  long-term  projects  sourced  from  this  investor 
base.  

Both  of  the  abovementioned  objectives  would  increase  investment  in  long-term  assets, 
sustainable  economic  growth,  job  creation  and  innovation  in  the  EU.  Achieving  the 
above-mentioned specific objectives is thereby linked to the general objectives  outlined 
in Section 4.2. below. 

5. 

AVAILABLE POLICY OPTIONS AND IMPACT 

This section describes and assesses the policy options identified to tackle the ELTIF fund 
restrictions  applying  to  both  retail  and  professional  investors,  as  well  as  retail-investor 
specific requirements and limitations for the access of retail investors to ELTIFs.  

In each area, options are described, their impact on stakeholders analysed and compared 
for their effectiveness and efficiency with the 'no action' option50 in meeting the specific 
objectives.  The  coherence  with  existing  measures  is  analysed,  and  an  explanation  on 
whether  the  options  conforms  to  the  principles  of  subsidiarity  and  proportionality  is 
provided. Preferred options are also identified below (see Section 7). 

Certain  technical  aspects  and  more  detailed  fund  rules  are  reflected  in  Annex  7 
(eligibility  of  assets  and  investments,  portfolio  composition,  diversification  and 
concentration  limit  requirements,  redemptions  regime,  borrowing  of  cash  requirements, 
etc.).  

5.1. 

Baseline from which options are assessed 

In terms  of market  development, the ELTIF segment remains sub-scale, i.e. despite  the 
ELTIF  legal  framework  being  in  place  for  more  than  five  years  ELTIFs  have  failed  to 
scale up significantly.51  

Retail-investors specific requirements and limitations 

In  terms  of  the  access  of  retail  investors  to  ELTIFs,  the  ELTIF  Regulation  contains 
specific requirements to limit the participation of retail investors. The units or shares of 
an  ELTIF  may  be  marketed  to  retail  investors  on  the  condition  that  retail  investors  are 
provided  with  appropriate  investment  advice  from  the  manager  of  the  ELTIF  or  the 
distributor  (Article  30(1)  of  the  ELTIF  Regulation).  An  ELTIF  manager  can  directly 
offer or place ELTIFs to retail investors only if it is specifically authorised to do so and 

50  
The following schema is used: 0 (baseline scenario, no policy change), ++ (strongly positive contribution), + 
(positive contribution), -- (strongly negative contribution), - (negative contribution), ≈ (marginal/neutral contribution), 
? (uncertain contribution), n.a. (not applicable) and 0 (neutral contribution). 
51  
ESMA  data  indicates  that  only  57  ELTIFs  are  authorised  as  of  October  2021  and  the  total  net  assets  of 
approximately EUR 2.4 billion. This is a small fraction of the EUR 6.8 trillion of the total EU AIF market. Currently, 
ELTIFs are domiciled in only 4 Member States (in France, Italy, Luxembourg and Spain). The other Member States 
have no domestic ELTIFs. According to ESMA’s data, a large portion of authorised ELTIFs are only marketed in the 
jurisdiction of their domicile while some funds that have been authorised have not yet become fully operational. 

23 

 
 
 
 
 
 
  
 
 
 
                                                           
only  after  that  manager  has  performed  the  suitability  test  set  out  in  the  ELTIF 
Regulation.52  

The manager of the ELTIF can only recommend ELTIFs if it is deemed suitable for that 
particular retail investor. It should be noted that the suitability test set out in the ELTIF 
Regulation  are  an  approximation  of  such  requirements  set  out  in  the  MiFID  II 
framework. 53  

Importantly, the ELTIF Regulation contains numeric thresholds that seek to further limit 
the participation  of the retail  investors  in  ELTIFs. Notably, Article 30(3) of the ELTIF 
Regulation  sets  out  that  where  the  financial  instrument  portfolio  of  a  potential  retail 
investor  does  not  exceed  EUR  500  000,  the  manager  of  the  ELTIF  or  any  distributor, 
after having performed the suitability test under the ELTIF Regulation, shall ensure, on 
the basis of the information  submitted by the potential  retail  investor, that the potential 
retail  investor  does  not  invest  an  aggregate  amount  exceeding  10%  of  that  investor's 
financial instrument portfolio in ELTIFs and that the initial minimum amount invested in 
one  or  more  ELTIFs  is  EUR  10,000.  Stakeholder  feedback  indicates  that  the  10% 
aggregate  test  is  ineffective  in  practice  as  it  relies  on  a  voluntary  declaration  by  the 
investor that the fund manager or the distributor of the product has no practical means to 
check or verify. These additional requirements (partially overlapping with those set out in 
MiFID  II  rules)  represent  an  unnecessary  administrative  burden  and  costs  for  fund 
managers  but  do  not  enhance  overall  investor  protection  within  the  framework  in  an 
effective manner.  

Both  the minimum  entry ticket  of EUR 10,000 and the aggregate maximum  amount of 
10% of the financial portfolio are cumulative requirements that are imposed  in addition 
to the suitability test of the ELTIF Regulation, and together have a deterrent effect on the 
ability and the capacity of retail investors to get exposure to ELTIFs.54  

It is important to note the retail focus of the ELTIF to establish an AIF product suitable 
for retail investors and designed to help them meet their long-term investment needs with 
a  well-regulated  product  framework  that  nevertheless  allows  them  to  invest  in  assets 
outside of the normal UCITS space.  

The existing barriers to retail investors are regarded as overly restrictive and ineffective, 
particularly given the fact that ELTIFs can only be sold subject to appropriate investment 
advice. However, removing or re-calibrating these elements of the framework may only 
lead  to  minor  improvements  to  investor  take-up  of  ELTIFs.  The  more  critical  element 
lies with the availability or supply of ELTIFs in the market. 

52  
To that end, when directly offering or placing an ELTIF to a retail investor, the ELTIF manager shall obtain 
extensive  information  about  the  retail  investor's  knowledge  and  experience  in  the  investment  field  relevant  to  the 
ELTIF, the retail investor's financial situation, including that investor's ability to bear losses, and the retail investor's 
investment  objectives,  including  that  investor's  time  horizon.  Article  28(2)  also  sets  out  that  “where  the  life  of  an 
ELTIF that is offered or placed to retail investors exceeds 10 years, the manager of the ELTIF or the distributor shall 
issue a clear written alert that the ELTIF product may not be suitable for retail investors that are unable to sustain such 
a long-term and illiquid commitment”. 
53  
There  are  many  commonalities  between  the  suitability  tests.  However,  the  ELTIF  Regulation  is  a partially 
overlapping regime that  would in practice have to be separately  implemented and complied with by asset  managers, 
who are otherwise more familiar with the commonly accepted MiFID II legal regime for the distribution of financial 
products. 
54  
The  information  on  the  sizes  of  financial  portfolios  are  self-reported  by  retail  investors,  and  it  appears 
challenging  for  asset  managers  or  distributers  to  control  the  accuracy  of  such  self-reported  information  calling  into 
questions the efficacy of this restriction in practice. 

24 

 
 
 
 
 
 
                                                           
Single rule-book for ELTIFs 

In  terms  of  the  applicability  of  the  ELTIF  rules,  the  ELTIF  Regulation  does  not 
differentiate among ELTIFs that are marketed to different categories of investors. ELTIF 
has a single set of fund rules that are equally applicable to ELTIFs that are  marketed to 
either professional or funds with a retail investor base. Notably, the ELTIF fund rules on 
the  eligible  assets,  diversification  and  portfolio  composition,  concentration  limits, 
borrowing  of  cash,  and  other  requirements  remain  identical  irrespective  of  the  end-
investor.  

It  should  also  be  noted  that  to  the  extent  that  ELTIFs  are  marketed  to  retail  investors, 
ELTIF  managers  have  to  adhere  to  additional  requirements  seeking  to  safeguard  the 
interests of retail investors, such as a requirement to have arrangements for dealing with 
complaints submitted by retail investors (Article 5(1)(d) of the ELTIF Regulation), a 2-
weeks  withdrawal  period  by  retail  investors55,  a  requirement  to  produce  and  make 
available  the  key  information  document  (KID)  of  the  ELTIF  in  the  event  that  it  is 
marketed to retail investors (Article 31(4) of the ELTIF Regulation), the requirement to 
have  a  depositary  where  an  ELTIF  is  marketed  to  retail  investors  (Article  29  of  the 
ELTIF Regulation), and other retail investor specific requirements. 

This  is  a  critical  element  identified  by  a  range  of  stakeholders  as  impairing  both  the 
attractiveness  and  the  utility  of  the  ELTIF  framework  for  investors  and  managers.  The 
introduction  of  more  flexible  rules  for  both  retail  and  professional  ELTIFs  will  be  a 
critical enabler for greater uptake of the regime in Europe. The additional flexibility for 
professional  only  funds  would  allow  fund  managers  to  design  specific  investment 
strategies and portfolios to meet the needs of their clients while still retaining the overall 
ELTIF  label  and  its  general  rules  and  requirements  which  are  particularly  valued  by 
investors. 

As  regards  the  additional  flexibility  for  professional  only  ELTIFs,  in  terms  of  legal 
treatment no differentiation would be envisaged between ELTIFs that can be marketed to 
professional investors only and those ELTIFs that can be marketed to retail investors. All 
ELTIFs  would  continue  to  be  subject  to  the  full  body  of  the  requirements  under  the 
ELTIF regulation.  

The  key  differences  between  the  two  types  would  be  that  those  ELTIFs  marketed 
exclusively to institutional investors would be as follows: no requirement to prepare the 
KID; no requirement for the 2-weeks withdrawal period; no requirement to have facilities 
and arrangements to deal with complaints with retail investors; more flexibility in terms 
of  borrowing  of  cash  for  those  ELTIFs  that  can  be  marketed  solely  to  professional 
investors, than those ELTIFs to which retail investors may have access. Furthermore, for 
those  ELTIFs  marketed  solely  to  professional  investors,  it  would  be  appropriate  to 
remove  the  10%  limitation  in  terms  of  exposures  to  instruments  issued  by,  or  loans 
granted  to,  any  single  qualifying  portfolio  undertaking,  single-asset  investments  and 
investments in EuSEF, EuVECA or ELTIF portfolio.  

55  
Article  30(6)  of  the  ELTIF  Regulation  sets  out  that  “retail  investors  shall  be  able,  during  the  subscription 
period  and  at  least  two  weeks  after  the  date  of  their  subscription  to  units  or  shares  of  the  ELTIF,  to  cancel  their 
subscription and have the money returned without penalty.” 

25 

 
 
 
 
 
 
 
 
                                                           
Maintaining  a  close  alignment  between  the  rules  for  ELTIF’s  marketed  only  to 
professional  investors  and  those  available  to  retail  would  remain  key.  Given  the 
availability  of  alternative  vehicles  for  professional  investors  (e.g.  AIF’s),  stakeholders 
have highlighted that the appeal of ELTIF lies within possibility to offer this fund to both 
categories of investors on a pan-European basis. Whilst some additional protections are 
necessary for funds being marketed to retail investors, a further, more distinct separation 
would  put  at  risk  the  attractiveness  of  ELTIF  for  fund  managers.  Investment  alongside 
institutional  capital  providers  would  also  allow  retail  investors  to  benefit  in  terms  of 
better fund oversight and possibly better cost-performance.  

ELTIF redemptions regime 

While individual investors may be interested in investing in an ELTIF, the illiquid nature 
of  most  investments  in  long-term  projects  precludes  an  ELTIF  from  offering  regular 
redemptions to its investors. The commitment of the individual investor to an investment 
in  such  assets  is,  by  its  nature,  made  to  the  full  term  of  the  investment.  ELTIFs  was, 
consequently,  been  structured  in  principle  so  as  not  to  offer  regular  or  periodic 
redemptions before the end of the life of the ELTIF. To that end, the key standard rule of 
the ELTIF regime in this area is that investors in an ELTIF would not be able to request 
the  redemption  of  their  units  or  shares  before  the  end  of  the  life  of  the  ELTIF. 
Redemptions to investors would, as a rule, solely be possible after the life of the ELTIF 
(typically the life cycle of an ELTIF is several years). 

Nevertheless,  in  order  to  incentivise  investors,  in  particular  retail  investors,  who  might 
not be willing to lock their capital up for such a long period of time but would otherwise 
seek  to  invest  in  ELTIFs,  it  would  prove  appropriate  to  consider  policy  merits  of 
allowing  ELTIFs  to  offer  in  exceptional  and  clearly  pre-defined  situations  early 
redemption rights to investors. 56  

In  this  context,  Article  18(2)  of  ELTIF  regulation  foresees  that  “By  way  of  derogation 
from  paragraph  1  [no  redemption  allowed  before  the  end  of  life  of  ELTIF],  rules  or 
instruments of incorporation of the ELTIF may provide for the possibility of redemptions 
before the end of the life of the ELTIF” provided that all of the conditions laid down in 
the  ELTIF  Regulation  are  fulfilled.  In  particular  redemptions  are  possible  up  to  a 
percentage  of  the  liquid  assets  invested  in  the  funds.  Notably,  these  liquid  assets 
represent less than 30% of its capital. 

More  flexible  redemption  options  within  the  framework  was  requested  by  some 
stakeholders  and  may  increase  the  appeal  of  ELTIFs  to  certain  managers  and  investors 
but to a lesser extent than the differentiated fund rules and retail barriers to entry. 

Parallel initiatives 

Changes  introduced  to  the  AIFMD  may  also  impact  on  the  functioning  of  the  ELTIF 
framework.  It  is  important  to  note  that  the  AIFMD  review  would  contain  targeted 
amendments to the regime as the framework is regarded as functioning effectively. Based 

56  
The rationale behind the need to consider this proposal has been the feedback of some industry participants 
and  the  fact  that  some  AIFs  with  similar  eligible  assets  (real  estate  and  SME)  offer  regular,  albeit  not  frequent, 
redemptions  under  strict  conditions  and  using  respective  liquidity  management  tools.  In  addition,  it  would  be 
appropriate to consider placing such AIFMs under a degree of supervision to agree upon and monitor the fund liquidity 
profile. 

26 

 
 
 
 
 
 
 
 
                                                           
on  the  current  proposal,  certain  measures  may  lead  to  increased  costs  for  AIFMs 
managing  ELTIFs,  but  these  would  be  outweighed  by  the  need  to  support  adequate 
supervisory  oversight  of  the  AIF  sector  to  ensure  investor  protection  and  broader 
financial  stability  and  there  are  no  outright  conflicting  proposals  between  the  two 
reviews. Additional information on the proposed amendments under the AIFMD review 
are set out in Annex 5.  

5.2.1.  Options assessing the application of the fund rules to all investor categories  

The following options were considered: 

Table  2  –  Policy  options  assessing  the  application  of  the  fund  rules  to  all  investor 
categories 

Policy options 

Description 

1. No policy action 
2. More permissive fund rules  

3. Differentiation between ELTIFs 
marketed to professional and/or 
retail investors 

Retaining the one-size-fits-all ELTIF rules 
Allowing  a  more  permissive  fund  rules  regime  for  all  ELTIFs 
irrespective of end investors 
Introducing  a  clearer  separation  and  more  flexibility  between  fund 
rules  depending  on  the  funds  investors  (ELTIFs  that  can  be 
marketed  solely  to  professional  investors  and  ELTIFs  that  can  be 
marketed to retail investors) 

Option 1 – No policy action 

This Option would maintain the current status quo whereby ELTIFs would continue to be 
subject to the same fund rules. 

Option 2 – More permissive fund rules for all ELTIFs  

Since rules are considered too restrictive based on available evidence, a straight-forward 
option would be to  make ELTIF  fund rules more permissive. As rules currently do not 
distinguish  between  ELTIFs  marketed  to  retail  investors  and  those  available  only  to 
professional investors. To meet the needs of ELTIF fund managers, such change would 
need to be quite sizeable to make funds attractive for professional investors.  

However, this Option could raise concerns for retail investor protection. ELTIFs are not 
the  same  as  UCITS  and  their  risk-profile  is  not  necessarily  commensurate  with  a  risk-
tolerance of every  retail  investor. More permissive fund rules in  such areas  as leverage 
may not be appropriate for all retail investors. At the same time, it could yield substantial 
benefits for the attractiveness of ELTIFs to professional investors. 

Option 3 – Clearer separation between fund rules for different classes of investors 

Under Option 3, the flexibility contemplated in the ELTIF rules should be differentiated 
for  retail  and  professional  investors  to  allow,  for  instance,  greater  leverage  for 
professional investors or more leeway in terms of portfolio composition rules and asset 
diversification requirements.57  

57  
It should be noted that the “separation” between fund rules would not imply a “separation” in a legal sense or 
any sort of split in the way ELTIs are authorised, operated and invested in, i.e. a single label fund regime and  its core 
requirements would not and are not aimed at creating a two-tier ELTIF. 

27 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
This  option  stems  from  ESMA’s  technical  advice  to  the  Commission  dated  3  February 
2021,  in  which  ESMA  explicitly  recognised  the  underlying  conflict  of  the  ELTIF 
framework  in  trying  to  serve  the  needs  of  both  professional  and  retail  investors  with  a 
single  rulebook  approach.58  ESMA  went  on  to  recommend  a  clear  separation  between 
those  ELTIFs  that  are  marketed  to  solely  professional  investors  and  the  rest,  i.e.  those 
ELTIFs that can be marketed to retail investors. More specifically, according to ESMA 
“If it is considered relevant to create a specific type of ELTIFs for professional investors 
only, these ELTIFs could benefit e.g. from a higher level of leverage and more flexibility 
in terms of portfolio diversification and composition.” 

5.2.2.  Options assessing the specific requirements concerning  reduction of ELTIF 

barriers to participation of retail investors  

The following options were considered: 

Table  3  –  Policy  options  assessing  the  specific  requirements  concerning  reduction  of 
ELTIF barriers to participation of retail investors 

Policy options 

Description 

1. No policy action 

2. Reducing or eliminating both 
barriers to entry for retail investors  

Retaining  the  minimum  investment  barrier  and  the  10%  limit,  and 
the current ELTIF-specific suitability tests 
Eliminating  both  the  minimum  investment  barrier  and  the  10% 
minimum investment limit, and removing the ad-hoc suitability tests 
to align fully with MiFID II  

Option 1 – No policy action 

Absence  of  policy  action  or  retaining  the  status  quo  does  not  seem,  ex  ante,  a  viable 
option, since it would, at the very minimum, fall short of providing any new impetus to 
the  development  of  the  ELTIFs  and  attracting  additional  investments  from  retail 
investors.  Option  1  means  that  retail  investors  would  continuously  to  face  barriers  to 
investing  into  ELTIFs  due  to  the  significant  deterrent  effects  the  ELTIF  specific  tests 
have  on  the  investment  decisions  and  investment  capacity  of  retail  investors,  and  that 
ELTIF would continue failing to channel investment towards long-term projects and the 
real economy. 

Option 2 – Reducing or eliminating both barriers for retail investors 

This  option  would  involve a combination of  measures,  including substantially reducing 
or  removing  the  EUR  10,000  minimum  initial  investment  participation  (the  “entry 
ticket”)  required  by  the  ELTIF  Regulation;  and  the  10%  aggregate  investment 
requirement for those retail investors whose financial portfolios are below EUR 500,000. 

58  
According  to  ESMA,  “in  this  context,  it  should  also  be  noted  that  Article  30(4)  of  the  ELTIF  Regulation 
(equal  treatment  of  all  investors),  if  interpreted  strictly,  could  imply  that  no  specific  share  classes  can  be  launched 
within  an  ELTIF  opened  to  retail  investors.  In  that  case,  professional  investors  would  be  dissuaded  to  invest  in  an 
ELTIF opened to retail investors as they would have to pay the same percentage/amount of  fees than retail investors 
although their subscriptions are generally much higher. It could therefore be necessary to further specify/clarify this 
requirement”. 

28 

 
 
 
 
 
 
 
 
 
 
 
 
                                                           
Compared  to  Option  1,  Option  2  would  have  the  advantage  of  removing  burdensome 
requirements  which  in  themselves  have  the  intention  and  the  effect  of  dissuading  the 
participation of retail investors. At the same time, Option 2 would fall short of the goal to 
remove  unnecessary  and  ineffective  barriers  on  the  participation  of  retail  investors. 
Deleting  or substantially reducing the  EUR  10,000 entry ticket  while leaving intact  the 
10%  aggregate  investment  threshold  would  ex  ante  limit  the  opportunity  of  retail 
investors  to  get  exposure  to  ELTIFs  in  a  manner  that  could,  in  aggregate,  constitute  a 
legitimate  investment  strategy  that  could  be  both  suitable  and  appropriate  for  the  retail 
investor.  Importantly,  the  current  10%  aggregate  exposure  limit  is  solely  based  on  the 
self-reported information by the retail investors, who can simply misrepresent the size of 
their financial portfolios and/or their exposures to other ELTIFs.  

It  is  both  impracticable  and  administratively  costly  for  the  asset  managers  and/or 
distributors to verify or enforce the application of such a 10% limit. The aggregate 10% 
limit  on  retail  investors  with  portfolios  below  EUR  500,000  is  thereby  banning  retail 
investors  from  getting  exposure  to  a  specific  ELTIF  once  a  10%  portfolio  allocation 
“quota” has been reached. 

The elimination or  reduction  of the EUR 10,000  minimum  investment  threshold  would 
provide  an  opportunity  to  those  retail  investors  willing  and  able  to  diversify  their 
portfolios  with  lower  amounts  than  EUR  10,000.  Consideration  could  also  be  given  to 
reducing  the  threshold  to  a  lower  amount.  This  option  would  increase  the  potential 
overall  volumes  of  the  funds  that  could  be  invested  by  retail  investors  into  ELTIFs.  In 
addition,  the  elimination  of  the  10%  aggregate  investment  threshold  would  no  longer 
limit the exposure of retail investors whose financial portfolios are below EUR 500,000. 
However, given the proposal to align with the MiFID II suitability tests, it is questionable 
what  added  value  this  additional  ELTIF  only  restrictions  bring  in  terms  of  investor 
protection. In reality, the tests are generally ineffective and force retail investors to hold 
larger  single  exposure  in  ELTIFs  instead  of  allowing  them  the  possibility  to  invest 
smaller amounts across more funds. These barriers are not applied to any other fund type 
and are discriminatory towards retail investors. It is on this basis that the preferred option 
is to eliminate the additional retail investor restrictions. 

From the perspective of restrictions to the participation of retail investors, it would also 
be  appropriate  to  replace  the  ELTIF  suitability  test  with  the  MiFID  II  suitability 
framework59.  This  would  ensure  that  the  full  range  of  investor  protection  measures  in 
MiFID II would continue to apply, including the suitability assessment which takes into 
account  clients’  experience,  wealth,  risk  profile  and  investment  horizon.  It  should  be 
noted that this clarification and alignment of the ELTIF suitability test will maintain an 
adequate level of protection under the ELTIF regime. 

Combining  the  MIFID  II  requirements  with  the  other  proposed  changes  presents  a 
balanced package of measures that ensures continued investor protection while opening 
up ELTIFs to a wider range of retail investors, particularly those who may have longer-
term  investment  needs  that  can  be  met  by  ELTIFs  but  may  not  want  to  invest  larger 
amounts  up-front.  These  changes  will  grant  ELTIF  managers  the  discretion  to  set  their 

59  
Article 28(1) of the ELTIF Regulation, i.e. ad-hoc ELTIF suitability test, may be deemed as redundant with 
provisions  in  Article  30.  Some  stakeholders  have  also  citied  unclear  terms  in  ELTIF  current  rules  (e.g.  what  is 
considered  to  be  “offering”  or  “placing”  in  Article  28.  Against  this  background,  MIFID  regulatory  frame  provide  a 
comprehensive  set  of  provisions.  These  rules  are  enforceable  (not  the  case  in  ELTIF  if  the  suitability  test  is 
insufficient). 

29 

 
 
 
 
 
                                                           
own minimum subscription limits which would facilitate the development of more retail 
accessible funds in response to investor demands. 

5.2.3.  Options assessing the redemption policy and life-cycle of ELTIFs 

The following options were considered: 

Table 4 – Policy options assessing the redemption policy and life-cycle of ELTIFs 

Policy options 

Description 

1. No policy action 

2. Introducing regularity 
(periodicity) into the ELTIF 
redemptions regime  
3. Allowing limited redemptions 
through optional liquidity 
windows regime 

No  action,  i.e.  preserving  closed-end  nature  during  fund’s  life-
cycle, subject to exceptional redemptions 
Introducing  a  possibility  for  regular  (periodic)  redemption  policy 
(such  as  mid-term,  annual  or  quarterly  redemptions,  or  periodic 
redemptions, or “evergreen” structures) 
Allowing  an  optional  redemptions  “liquidity  window”,  such  as  a 
redemption mechanism matching the subscriptions via a secondary 
trading mechanism 

Option 1 – No policy action 

ELTIFs  could  generally  be  characterised  as  closed-end  funds  which  only  allow 
redemptions at the end of the life of the fund, except in limited circumstances set out by 
the ELTIF manager in the ELTIF fund documentation in clearly pre-defined exceptional 
cases. This fundamental rule of the lock-up during the life of a fund has been justified by 
the illiquid nature of the assets which an ELTIF is invested in, as well as the fact that the 
valuation of illiquid assets, taking into account the absence of a market able to provide a 
fair value on a continuous basis, may be assessed only at the time of the disinvestment (at 
the end of the life-cycle of the fund)60.  

Under  Option  1,  ELTIFs  would  remain  essentially  close-ended  with  very  limited  (or 
exceptional)  possibilities  for  redemption  set  out  in  the  ELTIF  Regulation.  This  would 
provide stability to the ELTIFs (since redemptions would be very limited) and provide an 
ELTIF manager an opportunity to safely execute upon the chosen strategy with almost no 
outflows from the fund. On the other hand, Option 1 would not be an adequate response 
to  the  calls  from  a  large  number  of  stakeholders  that  have  advocated  for  the  need  for 
more  readily  redeemable  ELTIF  structure  that  would  provide  for  broader  redemptions 
opportunities.  

Option 2 – Facilitating a more flexible redemptions regime 

Option 2 would imply an opportunity (or an entitlement) for investors for more regular or 
periodic redemptions (on a monthly, or quarterly, or bi-annual basis61 or even so-called 

60  
It should be noted in the context of the versatility of the eligible assets framework of the ELTIF regime that 
ELTIFs  may  encompasses  a  broad  range  of  asset  classes  (e.g.  small  listed  firms,  real  assets,  private 
equity/infrastructure  with  diverse  durations,  fixed  income  instruments)  with  different  durations,  risk  profiles  and 
standardisation levels. As a result, some narrow category of long-term assets  may have a secondary  market (such as 
certain real assets or listed SME or liquid fixed income securities) that may be compatible with, say, quarterly/semi-
annual NAV liquidity (but naturally not with daily/weekly redemptions due to the absence of the NAV calculations), 
whilst  a  large  portion  of  ELTIF  eligible  long-term  assets  may  be  outright  incompatible  with  regular/periodic 
redemptions depending on the specific portfolio composition, investor base etc. 
61  
The  periodicity  and  regularity  of  redemptions  could  depend,  among  other  things,  on  the  availability  of 
liquidity  management  tools,  gates  and  notice  period,  and  be  subject  to  NCAs  approval  given  the  aforementioned 

30 

 
 
 
 
 
 
 
 
 
 
 
                                                           
“evergreen”  or  a  readily  available  redemption  structure  that  would  imply  that  ELTIFs 
redemption regime could resemble that of an open-ended fund). Option 2 was advocated 
by market participants seeking for a possibility to exit from the ELTIF before the end of 
the life of the fund to  address  the concern of  (predominantly  retail) investors who may 
perceive that they would be locked in their investments for an excessively long period of 
time.  

Option 3 – Allowing limited redemptions through optional liquidity windows  

Under  option  3,  the  ELTIF  would  remain  essentially  closed-ended  but  updated  rules 
would  allow  additional  flexibility  for  liquidity  based  on  a  matching  mechanism  – 
voluntary for asset managers – for matching the supply and demand of transfer requests 
by  exiting  ELTIF  investors  and  subscription  requests  by  new  ELTIF  investors. 
According  to  this  option,  the  revised  ELTIF  Regulation  would  contain  a  secondary 
trading liquidity matching mechanism, once the ELTIF has ramped up, for expressing an 
open interest, with a few weeks or months advance notice, in  new subscriptions for the 
units or shares of an ELTIF. Transfers of shares or units of ELTIFs by exiting investors 
would only be permitted, at the discretion of the asset manager and solely if the liquidity 
window mechanism is set out in the fund documentation and the prospectus, to the extent 
that a corresponding subscription interest was available to match the existing investors’ 
units or shares in an ELTIF.  

This  liquidity  window  mechanism  could  satisfy  the  demand  from  distributors  who 
expressed  their  concern  about  the  ELTIF’s  limited  redemption  options  for  retail 
investors. Since ELTIF would remain essentially closed-ended, option 3 would facilitate 
secondary trading and provide extra liquidity during the life of the ELTIF62. It would also 
ultimately  be  up  to  the  fund  manager  to  decide  if  it  is  appropriate  to  introduce  this 
mechanism  and  decide  the  frequency  to  be  offered  to  investors.  This  liquidity  window 
mechanism could be predefined in the fund documents. There are various possibilities to 
implement  option  3.  The  following  description  could  give  broad  parameters,  whilst  the 
technical  implementation  could  be  worked  out.63  In  particular,  one  would  foresee  a 
clarification of how the percentage of ELTIF’s liquid assets should be established.64  

Despite  the  fact  that  options  2  and  3  may  resemble  each  other,  they  are  fundamentally 
distinct. The key difference is that under option 3 the investors’ shares or units would not 

criteria: nature of eligible assets (e.g. existence of a secondary market (e.g. real  estate, listed SME)), asset life cycle, 
fund composition (e.g. cash buffer, size of the liquid part of the ELTIF), investor base, result of stress tests, etc. 
62  
It should be noted that this voluntary liquidity window  mechanism  may imply some burden in operating it 
and exchange of documentation, but this would be there only for those who choose to voluntarily use this mechanism. 
In  addition,  the  voluntary  nature  of  the  redemptions  window  would  allow  asset  managers  to  weigh  the  benefits  for 
attracting higher volumes of investment commitments and larger AuM, which would off-set the additional incremental 
costs associated to serving the redemption requests by virtue of matching subscriptions and redemptions. 
63  
In general, under Option 3, the number of fund shares will remain the same (no new shares will be created). 
The process could be similar to the current subscription/redemption process of any fund, which is performed generally 
by  the  fund  administrator.  Therefore,  the  incurred  costs  should  be  aligned  to those  of  an  open-ended  fund that  offer 
quarterly redemptions. It could even be less costly because the volume of orders to  manage should be lower. Under 
Option  3,  investors  would  send  their  subscription  or  withdrawal  form  to  the  fund  administrator  before  the  NAV  is 
published. The fund administrator will note the orders and have discretion to impose an appropriate notice period to 
receive  the  subscription  and  redemption  orders  to  facilitate  the  administration  process.  If  a  match  is  possible  (both, 
subscription  and  redemption orders  are  received)  orders  will  be  executed  on  the  dealing  day  at  the  published  NAV. 
Pro-rata mechanisms and other practicalities could be put in place. 
64  
An obvious manner to do this would be to establish a percentage of liquid assets to cap redemptions served. 
This percentage should take into consideration the volatility of the liquid assets (or be restricted to the cash held by the 
fund) as well as the expected future cash flows in order to ensure that ELTIF can meet all of its future payments and 
that its cash pocket could be replenished by the foreseeable cash-flows. 

31 

 
 
 
 
 
                                                                                                                                                                            
be withdrawn from the capital of the ELTIF but matched with the funds deposited by the 
subscribing investors who would receive the corresponding amounts of units or shares of 
ELTIFs. Under option 3, the possibility to exchange units or shares of ELTIFs could be 
an opportunity when offered by the ELTIF rules and approved by the fund manager, as 
opposed to option 2 which would rather be a general entitlement of investors to redeem 
their units or shares.  

5.3. 

Options discarded at an early stage 

This  section  s  describes  which  options  have  been  discarded  at  an  early  stage  and  why. 
Discarded  options  enjoying  significant  support  among  (certain  groups  of)  stakeholders 
would include  – limiting the scope of eligible investors, reducing access  to  ELTIFs for 
retail investors and other policy approaches that are ex ante inconsistent with the purpose 
of  the  legal  framework  and  the  objectives  of  this  initiative  and  CMU  Action  Plan  to 
increase retail investor participation. 

Repeal of the ELTIF Regulation 

Repealing  the  ELTIF  Regulation  was  considered  but  discarded  as  disproportionate  and 
not  supported  by  relevant  stakeholder  groups  Rather,  extensive  stakeholder  feedback 
indicates  that  there  is  a  market  demand  for  ELTIFs  but  that  take-up  could  be  further 
improved by allowing more flexibility for fund managers to better structure their funds 
and investment strategies. ELTIFs can play an important role in the market by providing 
investors with a well-regulated long-term investment product. ELTIF is also an important 
part  of  the  CMU  (as  recognised  by  the  HLF  in  its  report)  and  encouraging  greater 
participation  in  capital  markets  and  directing  investment  into  long-term  real  economy 
projects  across  Europe.  They  can  be  an  important  source  of  financing  as  the  European 
economy moves into the post-pandemic recovery and transitions to the ‘new normal’.  

Two further options were considered based on stakeholder suggestions, but discarded: 

Introducing a “third category” of “semi-professional” investors 

Some stakeholders have called for potentially introducing a third (intermediary) category 
of a “semi-professional” investor in  the expectation  of  increased inflows  of funds from 
high-net-worth 
third  category  of  a  “semi-
professional”  investor  would  require  a  profound  reengineering  of  the  AIFMD  and  the 
MiFIDII/MiFIR rules and definitions. This is an impracticable solution falls outside the 
scope of the current initiative. 

individuals.  Introducing  a  separate 

Providing for carve-outs or facilitating the listing of ELTIFs 

Some stakeholders have called for the regime allowing an ELTIF of indefinite duration, 
e.g.  if  admitted  to  trading  on  a  regulated  market  and  provided  minimum  liquidity 
conditions  are  met.  Such  policy  proposals  would  only  prove  workable  in  so  far  as  all 
ELTIFs  are  traded  on  a  regulated  market  (currently  no  shares  or  units  of  ELTIFs  are 
being publicly traded). It is also impracticable and legally impossible to provide explicit 
incentives  via  the  ELTIF  Regulation  for  the  public  listing  of  ELTIFs  since  that  would 
require  a  potential  change  in  the  Prospectus  Regulation,  the  Market  Abuse  Regulation, 
Transparency Directive and other EU legal acts. 

32 

 
 
 
  
 
 
 
 
 
 
6. 

HOW DO THE OPTIONS COMPARE? 

6.1. 

Greater flexibility in the ELTIF regime for professionals-only ELTIFs 

In its advice to the Commission dated 3 February 2021, ESMA explicitly recognised the 
underlying  conflict  of  the  ELTIF  framework,  i.e.  trying  to  serve  the  needs  of  both 
professional  and  retail  investors  with  the  blanket  one-size-fits-all  approach65.  ESMA 
recommended  a  clearer  separation  between  those  ELTIFs  that  are  marketed  solely  to 
professional investors and those ELTIFs that can be marketed to retail investors.  

More specifically, according to ESMA “If it is  considered relevant  to  create a specific 
type  of  ELTIFs  for  professional  investors  only,  these  ELTIFs  could  benefit  e.g.  from  a 
higher  level  of  leverage  and  more  flexibility  in  terms  of  portfolio  diversification  and 
composition.” 66 

ESMA’s  advice  to  create  a  clearer  distinction  between  these  two  different  types  of 
ELTIFs would allow managers to tailor more appropriate fund rules, on the one hand, for 
those  ELTIFs  that  can  be  marketed  exclusively  to  professional  investors  with  less 
prescriptive fund rules as regards the scope of eligible assets and investments, be far less 
prescriptive in terms of the diversification, concentration rules, leverage etc. and, on the 
other hand, those ELTIFs that can be marketed to retail investors.  

Comparison of options 

Option 1 (no action) will have no impacts or effects. 

Option 2 would have a generally positive effect on the development of a wider range of 
ELTIFs. At the same time, some funds may not be suitable for retail investors due to the 
illiquidity and the nature of the underlying assets and investment strategies pursued. This 
option would also imply that marketing of ELTIFs to retail investors, in the presence of 
professional  investors,  would  still  introduce  restrictions  and  costs  related  to  the 
marketing of ELTIFs to retail investors (such as the requirement to prepare the KID, the 
2-weeks  withdrawal  period, the requirement to  have facilities and arrangements to  deal 
with complaints with retail investors, etc.). Such costs would likely be spread among all 
investors (including professional investors of ELTIFs) due to the requirement of an equal 
treatment of investors.  

It  could  be  argued  that  easing  of  the  ELTIF  fund  rules  for  ELTIFs  irrespective  of  the 
investor category (investor base) to which ELTIFs are being marketed will undermine the 

65  
ESMA  noted  “In  this  context,  it  should  also  be  noted  that  Article  30(4)  of  the  ELTIF  Regulation  (equal 
treatment of all investors), if interpreted strictly, could imply that no specific share classes can be launched within an 
ELTIF opened to retail investors. In that case, professional investors would be dissuaded to invest in an ELTIF opened 
to retail investors as they  would have to pay the same percentage/amount of fees than retail investors although their 
subscriptions  are  generally  much  higher.  It  could  therefore  be  necessary  to  further  specify/clarify  this  requirement”. 
Under  ESMA’s  proposal,  both  legally  and  substantially  ELTIFs  would  still  have  the  same  label  (i.e.  no  separate 
category will be created), but with different rules depending on whether it is marketed solely to professional investors 
or  can  also  be  purchased  by  retail  investors.  In  the  latter  case,  such  ELTIFs  would  still  need  to  observe  more 
conservative fund rules than those funds marketed only to professionals. 
66  

See Footnote 18. 

33 

 
 
 
 
 
 
 
 
 
 
                                                           
effective protection of investors by triggering mis-selling of financial products, which are 
not appropriate to retail investors due to their illiquidity and risk-profile. In addition, this 
might, in turn, create opposition from the NCAs which are responsible for the effective 
oversight of the market. In this regard, ESMA has emphasised in its advice that these two 
types of investors (professional and retail) do not have necessarily the same needs. 

Some NCAs and ESMA, and some market participants have also noted that Article 30(4) 
of the ELTIF Regulation (equal  treatment  of all investors), if interpreted  strictly,  could 
imply that no specific share classes could be launched within an ELTIF opened to retail 
investors. In that case, professional investors would be dissuaded to invest in an ELTIF 
opened to retail investors as they would have to pay the same percentage/amount of fees 
than retail investors although their subscriptions are generally much higher.  

To the contrary, Option 3 would have the advantages of Option 2 without suffering from 
the  flaws  of  Option  2.  Notably,  Option  3  would  promote  a  more  tailored  approach 
whereby ELTIFs marketed solely to professional investors could benefit from additional 
flexibility, which would facilitate a fund structure and an investment strategy tailored to 
the  needs  of  their  professional  clients.  Among  such  differentiated  fund  rules,  where 
ELTIFs marketed solely to professional investors could have more flexibility (would be 
diversification and portfolio composition rules, concentration limits, threshold of eligible 
investments and borrowing of cash provisions.  

Option  3  has  been  endorsed  by  ESMA,  which  in  its  technical  advice  has  advocated  in 
favour  of  creation  on  a  specific  type  of  ELTIFs  for  professional  investors  only.  In  its 
assessment  “these  ELTIFs  could  benefit  e.g.  from  a  higher  level  of  leverage  and  more 
flexibility in terms of portfolio diversification and composition”67.  

Some market participants have questioned the introduction of the ELTIF for professional 
investors only citing the existing AIFMD framework and warned against the possibility 
that  the  ELTIFs  for  retail  investors  could  be  treated  less  favourably  than  the  current 
ELTIF  regime  (see  Annex  2).  In  addition,  some  stakeholders  have  expressed  concerns 
regarding the introduction of professional only funds as they attach particular value to the 
participation of retail investors in their funds. However, other stakeholders have indicated 
their support for this additional flexibility to design funds tailored to meet the needs of 
their  professional  and  high  net  worth  clients.  These  clients  are  interested  in  investing 
ELTIFs  given that they  are viewed as a well regulated product that can provide a safer 
pathway to access riskier investments such as private equity. However, the restrictions in 
the  ELTIF  make  it  difficult  to  design  a  fund  and  investment  strategy  that  meets  their 
exact  needs.  The  proposal  will  grant  managers  this  additional  flexibility  and  allow 
ELTIFs to tap into this new source of high net worth investors that have a different risk 
profile and appetite to the average retail investor. 

In this light, it has been concluded that Option 3 would grant additional limited flexibility 
(degree of flexibility of retail rules is discussed below) that would improve retail investor 
access  and  product  offering  suitable  for  retail  investors.  Ultimately,  Option  3  would 
enable  additional  flexibility  appropriate  to  both  types  of  investors  and  cater  for  a  more 
tailored value proposition. 

67  

Footnote 18, page 9. 

34 

 
 
 
 
 
 
 
                                                           
Comparison of options: 

Objective  

More permissive fund rules for all ELTIFs  Differentiation between ELTIFs marketed to 

Improve the 
attractiveness of 
the ELTIF 
regime for asset 
managers 

Facilitate access 
for retail 
investors while 
preserving 
investor 
protection 
Increase the size 
of the ELTIF 
market and 
overall funding 
channelled via 
ELTIFs 
Efficiency (cost-
effectiveness) 

+ 
Fund managers would have a broader 
investment universe for their ELTIFs 
allowing them more flexibility when 
designing investment strategies and 
respond to investor needs 
+ 
More ELTIFs with a broader range of 
strategies would make it easier for 
investors to find funds that meet their 
investment needs 

+ 
More flexible fund rules could attract more 
managers to establish ELTIFs 

+ 
Managers will be subject to less stringent 
rules that would improve the efficiency of 
their portfolio management. There would 
be no additional compliance costs. 

Impact on SMEs  + 

More investors and funds would lead to 
more investment in SMEs 

professional and/or retail investors 
++ 
Investment rules would be significantly more 
flexible for managers targeting professional 
clients while ELTIFs with retail investors 
would still be subject to specific fund rules 

+ 
More ELTIFs with a broader range of 
strategies would make it easier for investors 
to find funds that meet their investment 
needs.  

++ 
More flexible fund rules could attract more 
managers to establish ELTIFs and allow the 
development of ELTIFs targeting 
professional investors with larger investment 
capacities that demand specific strategies 
+ 
Managers will be subject to less stringent 
rules that would improve the efficiency of 
their portfolio management. There would be 
no additional compliance costs. 

+ 
More investors and funds would lead to 
more investment in SMEs 

Other economic, 
environmental, 
social and 
fundamental 
rights impacts 
Coherence with 
EU policy 
objectives 

+ 
More investors and availability of ELTIFs 
on the market will lead to increased 
investment in social and environmental 
projects 
+ 
Aligned with overall CMU strategy to 
continue building internal market for 
financial services and ensure strategic 
independence of the EU 

+ 
More investors and availability of ELTIFs 
on the market will lead to increased 
investment in social and environmental 
projects 
+ 
Aligned with overall CMU strategy  

Legend: +++ = Very positive  ++ = Positive  + = Slightly positive   +/-  =  Mixed  effect                

0 = no effect 

- = Slightly negative 

-- = Negative 

--- = very negative 

35 

 
 
 
 
 
 
 
 
 
Summary of impacts: 

Table 5 - Greater flexibility in the ELTIF regime for funds marketed only to professional 
investors (summary of impacts) 

Policy option 

No action 
Option  2  – 
More 
permissive 
fund  rules  for 
all ELTIFs 

Impact on retail 
investors 
0 

Impact on professional 
investors 
0 

Effectiveness 

0 

+ 
Stakeholder feedback 
indicates that any additional 
flexibility would improve the 
framework 

+/- 
Would allow the 
development of a wider 
range of ELTIF products 
but some funds may not 
be suitable for retail 
investors 
+ 
Additional limited 
flexibility would improve 
retail investor access and 
product offering suitable 
for retail investors 

+  
Would allow the 
development of a wider 
range of ELTIF products 
but presence of retail 
investors would still 
impose some restrictions 
++ 
Fund managers could 
design fund structures that 
are tailored to the needs of 
their professional clients 

Option 3 – 
Clearer 
separation 
between retail 
and 
professional 
investors 
Legend: +++ = Very positive  ++ = Positive  + = Slightly positive   +/-  =  Mixed  effect                

++ 
This approach allows 
additional flexibility 
appropriate to both types of 
investor 

0 = no effect 

- = Slightly negative 

-- = Negative 

--- = very negative 

6.2. 

Removing the restrictions for the access by retail investors 

From the initial  stakeholders feedback,  as well  as the history of the negotiations of the 
current ELTIF Regulation (i.e. the EUR 10,000 entry ticket and the 10% of the financial 
portfolio  threshold  were  inserted  by  the  Member  States),  Option  2  may  be  opposed  by 
some Member States who may consider that these changes could pose an increased risk 
to retail investors. Some stakeholders could view this option as allowing retail investors 
to take higher risks in comparison to their financial capacity. 

However,  when  taken  together,  the  ELTIF  Regulation’s  UCITS-inspired  diversification 
requirements set out in Article 13 and those related to retail distribution and target market 
identification,  as  well  as  the  requirement  to  have  in  place  a  depositary,  the  fact  that  a 
suitability  assessment  will  be  performed  when  an  ELTIF  is  marketed  to  retail  investor, 
offer effective investor protection without the need for the additional restrictions.  

Hence,  the  full  range  of  investor  protection  measures  in  MiFID  II  would  continue  to 
apply, including the suitability assessment which takes into account clients’ experience, 
wealth,  risk  profile  and 
these  existing  regulatory 
investment  horizon.  Given 
requirements,  the  additional  constraints  related  to  minimum  investment  amounts  and 
thresholds do not add substantively to the protection of retail investors. While at the same 
time  they  preclude  retail  investors  for  whom  an  ELTIF  investment  is  suitable  and 
appropriate. 

Comparison of options  

Option 1 would offer no difference in terms of the current sub-scale operation of the ELTIF 
regime.  

36 

 
 
 
 
 
 
 
 
 
 
 
Option  2  proposes  to  reduce  the  barriers  to  entry  for  retail  investors  and  offers  distinct 
advantages  by  facilitating  an  increased  access  of  retail  investors  to  ELTIFs  to  benefit  the 
growth of the ELTIF market. 

At  the  same  time,  care  would  have  to  be  taken  in  making  such  changes  to  ensure  that 
adequate levels of investor protection are maintained and measures taken to prevent the 
mis-selling of ELTIF products.  

In  general,  there  has  been  an  overwhelming  support  by  market  participants  for  the 
deletion of both the EUR 10,000 minimum investment and the 10% aggregate threshold, 
as well as in favour of the streamlining of the ELTIF’s suitability test (and removing the 
requirement  of  the  “appropriate  investment  advice”)  with  the  MiFID  II  framework  in 
order  to  avoid  duplications.  The  High-Level  Report  on  the  CMU  report  has  explicitly 
called for an amendment of Articles 27 and 28 of the ELTIF Regulation to reflect such a 
change.68  This  option  was  also  endorsed  by  several  large  asset  management  industry 
associations  and  asset  managers  which  have  cited  detrimental  effects  such  restrictions 
have on the participation of retail investors. 

Despite  the  fact  that  ESMA  has  not  recommended  explicitly  to  remove  the 
abovementioned hurdles, a large number of NCAs have shown openness to considering 
such amendments. Only a very small number of NCAs have cited risks to the protection 
of retail investors stemming from excessive exposures to ELTIFs.  

On balance, it is considered that Option 2, to reduce or eliminate the barriers should not 
detract from the effectiveness of the existing safeguards and the protection measures for 
retail  investors.  That  is  because  when  taken  together,  the  ELTIF  Regulation’s  UCITS-
inspired  diversification  requirements  set  out  in  Article  13  and  those  related  to  retail 
distribution and target market identification, as well as the requirement to have in place a 
depositary  (i.e.  no  depositary  obligation  exists  for  EuVECAs  and  EuSEFs),  may  be 
deemed  to  offer  effective  investor  protections.  There  is  also  a  requirement  for  a 
prospectus  and  a  KID  for  retail  investors,  as  well  as  the  possibility  for  a  2-weeks 
withdrawal period, which provide for additional safeguards for retail investors. 

In summary, the abovementioned options of deleting both the 10% aggregate investment 
threshold and the EUR 10,000 minimum investment ticket, whilst aligning the suitability 
assessment requirements with those under MiFID II would not weaken the retail investor 
protection.  On  the  contrary,  they  would  reduce  complexity  for  retail  investors  and 
managers and ensure greater clarity and certainty due to the closer alignment with MiFID 
II  distribution rules. This would also  strengthen  the visibility and inception of ELTIFs, 
reduce  administrative  costs  and  overall  benefit  retail  investors,  who  would  only  access 
these products after having completed a suitability assessment. 

Comparison of options: 

Objective  
Improve the attractiveness of the 
ELTIF regime for asset managers 

68  

Footnote 7, page 39. 

Reducing or eliminating both barriers to entry for retail investors 
+ 
Reduces the administrative burden of carrying out ineffective 
assessments of retail investors  

37 

 
 
 
 
 
 
 
 
 
                                                           
Facilitate access for retail investors 
while preserving investor protection 

+ 
Easier for retail investors to invest in ELTIFs 

Increase the size of the ELTIF market 
and overall funding channelled via 
ELTIFs 

Efficiency (cost-effectiveness) 

Impact on SMEs 

+ 
Greater retail participation will increase size of the market 

+ 
Reduces the administrative burden of carrying out ineffective 
assessments of retail investors  
+ 
More investors and funds would lead to more investment in SMEs 

Other economic, environmental, 
social and fundamental rights impacts 

+ 
More investors and availability of ELTIFs on the market will lead 
to increased investment in social and environmental projects 

Coherence with EU policy objectives  + 

Aligned with overall CMU strategy to continue building internal 
market for financial services and ensure strategic independence of 
the EU 

Legend: +++ = Very positive  ++ = Positive  + = Slightly positive   +/-  =  Mixed  effect                

0 = no effect 

- = Slightly negative 

-- = Negative 

--- = very negative 

Summary of impacts: 

Table  6  -  Removing  the  restrictions  for  the  access  by  retail  investors  (summary  of 
impacts) 

Policy option 

Impact on  
retail investors 

Impacts on 
project 
owners/SMEs 
0 

Impacts on 
managers 

0 

0 

No action 
Option 2 – 
Reduce each of 
the barriers to 
entry 

++ 
Improved access 
to retail investors 
with barriers 
significantly 
reduced 

+ 
Improved capital 
flows from new 
inward 
investment/demand 
for ELTIFs 

+ 
Improved capital 
flows from  retail 
investors/ increased 
demand for ELTIFs 
and revenues from 
operating ELTIFs 

Effectiveness 

0 

+ 
Adjusting each of 
the barriers would 
allow retail 
investors to more 
easily access 
ELTIFs 

Legend: +++ = Very positive  ++ = Positive  + = Slightly positive   +/-  =  Mixed  effect                

0 = no effect 

- = Slightly negative 

-- = Negative 

--- = very negative 

6.3. 

Comparison of options on the redemption regime 

A  significant  number  of  investors  are  advocating  in  favour  of  easing  the  redemptions 
policy  of  ELTIFs  and  introduce  an  opportunity  for  regular  (periodic)  redemptions  by 
ELTIFs.  For  instance,  a  High-Level  Forum  on  the  CMU  report  has  recommended  to 
amend  the  rules  on  redemption  policy  and  life  of  ELTIFs  by  adding  appropriate 

38 

 
 
 
 
 
 
 
 
 
flexibility  for  investors  to  redeem  their  investment  before  the  end  of  the  closed-end 
fund’s lifetime, bearing in mind the liquidity of the underlying investments.69 

As  such,  the  proposal  by  certain  market  participants  to  introduce  regular  (periodic) 
redemptions  fails  to  fully  take  account  of  the  interests  of  the  redeeming  and  the 
remaining  investors,  as  well  as  impacts  on  the  financial  stability.  Readily  available 
redemptions come, as explained below, at a high cost and often happen to the detriment 
of  exiting 
investors. 
Furthermore, limitations to redemptions were cited as beneficial by some asset managers 
due  to  ELTIFs’  ability  to  withstand  the  volatility  and  market  cycles  and  allow  for  a 
sufficient time for the execution of an investment strategy. 

investors,  asset  managers  and 

remaining  non-redeeming 

Stakeholder  feedback,  and  policy  work,  as  well  as  specific  inputs  by  some  national 
regulators have suggested to explore the development of a secondary market for ELTIFs, 
which has, in  turn,  introduced  regulatory merits  of a “liquidity window”  mechanism to 
allow potential investors to express an open interest that can be submitted after at least 
one year of the operation of the fund and with a one month advance notice to subscribe 
for  the  units  of  an  ELTIF.  Such  open  interest  and  possible  subscription  would  only  be 
permitted in so far as and to the extent of a matching corresponding interest in redeeming 
the existing investors’ units in an ELTIF (see Annex 7).  

The advantage of this approach is  that it would  allow those investors that  wish to  exit, 
albeit  with  no  guarantee  of  doing  so,  while  protecting  the  interests  of  the  remaining 
investors. The optional redemptions window approach could be implemented irrespective 
of the categories of investors to whom ELTIFs are marketed. 

Comparison of options:  

If  applied  to  all  ELTIFs  regardless  of  the  underlying  assets,  funds  composition  and 
liquidity set up (e.g. existence of liquidity management tools such as gate arrangements) 
and investor base, Option  2 would  fall short on  delivering equitable outcomes for both 
the  exiting  and  remaining  investors,  as  well  as  the  asset  managers.70  Furthermore,  the 
cash and cash-like instruments that remain un-invested in the liquidity pocket due to the 
need  to  meet  redemption  requests  would  result  in  a  drag  on  performance,  further 
exacerbating suboptimal71 outcomes for the asset managers and remaining investors. 

Option  2 would imply  more flexibility in  the ELTIF redemptions  regime. Notably, this 
Option  would  mean  that  investors  could  redeem  their  investments  (with  substantially 
fewer conditions than currently allowed by the ELTIF regime).  

Option  3,  however,  will  be  focused  on  creating  liquidity  via  an  optional  liquidity 
mechanism.  Option  3  would  pursue  a  mechanism  which  would  facilitate  a  netting  of 
redemption/subscription orders which leads to an exchange in the ownership of units or 

69  
Ibid. 
70  
Notably,  the  redemption  from  intrinsically  illiquid  funds  with  highly  illiquid  idiosyncratic  portfolio  could 
yield  suboptimal  outcomes  for  both  exiting  investors  (fees,  valuation  of  illiquid  assets,  etc.),  for  the  remaining 
investors (liquidation of a part of the portfolio’s assets would damage the interests of such remaining investors), for the 
asset managers (dealing with regular or constant redemptions is costly and detracts the manager from its focus on the 
execution of the strategy). 
71  
of a part of the portfolio in liquid assets may be seen to provide some diversification to the fund. 

The presence of cash and cash-equivalent instruments should not per se be judged as negative. An investment 

39 

 
 
 
 
 
 
 
 
                                                           
shares in ELTIFs and respective cash-flows, and as a major advantage, does not lead to a 
reduction of the ELTIF’s capital.  

In this respect, the High-Level Forum on the CMU, in its report, has advocated in favour 
of  amending  the  rules  on  redemption  policy  and  life  of  ELTIFs  (Art.  18  of  the  ELTIF 
Regulation)  by  adding  appropriate  flexibility  for  investors  to  redeem  their  investment 
before the end of the closed-end fund’s lifetime72.  

The  views  of  market  participants  in  this  area  were  partially  mixed.  A  large  portion  of 
asset  managers  (predominantly  pursuing  equity  and  diversified  strategies,  as  well  as 
strategies  pursuing  investments  in  real  assets)  were  in  favour  of  more  flexible 
redemptions regime bearing in mind the liquidity of the underlying investments. On the 
contrary,  representatives  of  the  private  equity  have  consistently  cited  problems  of 
illiquidity and the difficulties of the valuation.  

Some of these concerns were also voiced in ESMA’s technical advice. Notably, ESMA 
has noted that ELTIFs are closed-end funds which, except in very limited circumstances, 
only  allow  redemptions  at  the  end  of  the  life  of  the  fund.  This  fundamental  rule  is,  in 
ESMA’s view, justified by the illiquid  nature of the assets  which an ELTIF is  invested 
in.73 

ESMA’s feedback in this area, as per its technical advice, was not conclusive. According 
to  ESMA,  “a  possible  option  would  be  to  develop  a  regime  allowing  an  ELTIF  of 
indefinite  duration,  e.g.  if  admitted  to  trading  on  a  regulated  market9  and  provided 
minimum liquidity conditions are met. In case of listed ELTIF, it should be clarified that 
the disinvestment from the ELTIF would be possible only on the secondary market.” 

Whilst the main strength of Option 3 is that it avoids the pitfalls of periodic redemptions 
described under Option 2, Option 3 would not always give a guarantee or assurance that 
the redemption would be possible. Essentially, Option 3 would facilitate the creation of 
the secondary market for the trading of units or shares of ELTIFs in a manner that would 
not undermine the liquidity profile of ELTIFs. 

Nevertheless,  Option  3  would  have  an  advantage  for  remaining  investors  and  project 
owners  whose  interests  would  not  be  prejudiced  by  outflows  from  ELTIFs  that  could 
diminish  the  capital  available  to  the  asset  manager  for  the  execution  of  the  ELTIF 
strategy.  The  optional  liquidity  windows  mechanism  under  Option  3  could  be  applied 
both by those ELTIFs marketed to exclusively professional investors and those that can 
be marketed to retail investors.  

Comparison of options: 

Objective  

Improve the 
attractiveness of 

Introducing regularity (periodicity) into 
the ELTIF redemptions regime 
- 
This would increase the administrative 

Allowing limited redemptions through optional 
liquidity windows regime 
 0 
This would allow managers to effectively 

72  
Footnote 7, page 39. 
73  
In addition, ESMA has expressed concerns with the valuation of assets related to the redemptions: “indeed, 
the valuation of illiquid assets, taking into account the absence of a market able to provide a fair value on a continuous 
basis, may be assessed only at the time of the disinvestment. Accordingly, the valuation is a crucial step and a pre-
condition to redeem the units of a closed-ended fund, and the availability of liquidity management tools might not be 
enough to meet these requirements”. See Footnote 18, page 7. 

40 

 
 
 
 
 
 
 
 
 
                                                           
the ELTIF 
regime for asset 
managers 

costs and burdens for asset managers 
and require additional liquidity 
management 

Facilitate access 
for retail 
investors while 
preserving 
investor 
protection 
Increase the size 
of the ELTIF 
market and 
overall funding 
channelled via 
ELTIFs 
Efficiency (cost-
effectiveness) 

+ 
Increased redemption channels would 
increase the utility and attractiveness of 
ELTIFs for retail investors as they 
could exit their investment more easily 

0 
No significant impact on the overall 
market is predicted as only a limited 
number of managers would implement 
more frequent redemptions 

-- 
Increased redemption frequencies will 
lead to increased costs for investors 
and managers with the additional cost 
of maintaining a liquidity pocket 

manage redemption requests without 
maintaining an additional liquidity pocket but 
may still lead to increased administrative 
costs/burden   
+ 
While there would be certain requirements to be 
met in order to redeem their investment, 
investors would still have the possibility to exit 
earlier 

0 
No significant impact on the overall market is 
predicted as only a limited number of managers 
would implement more frequent redemptions 

- 
Increased redemption frequencies will lead to 
increased costs for investors and managers but 
there is no additional liquidity pocket needed 

Impact on SMEs  + 

Increased redemption flexibility may 
encourage more retail investors to 
purchase ELTIFs 

+/0 
While redemption would be possible this 
approach would be less flexible than option 2.  
Retail investors would have the possibility to 
exit their investment under certain conditions 

Other economic, 
environmental, 
social and 
fundamental 
rights impacts 
Coherence with 
EU policy 
objectives 

+/0 
More investors and availability of 
ELTIFs on the market will lead to 
increased investment in social and 
environmental projects 
+ 
Aligned with overall CMU strategy to 
continue building internal market for 
financial services and ensure strategic 
independence of the EU 

+ 
More investors and availability of ELTIFs on 
the market will lead to increased investment in 
social and environmental projects 

+ 
Aligned with overall CMU strategy  

Legend: +++ = Very positive  ++ = Positive  + = Slightly positive   +/-  =  Mixed  effect                

0 = no effect 

- = Slightly negative 

-- = Negative 

--- = very negative 

Summary of impacts: 

Table 7 - Optional liquidity windows redemption mechanism 

Policy 
option 

2 

No action 
Option 
More 
flexible 
redemptions 
regime 

Impact on  
redeeming 
investors 
0 

++ 
Investors can 
more easily 
redeem their 
holdings 

Impacts on 
remaining 
investors 
0 

- 
Fund 
managers 
would have to 
maintain a 
liquidity 

Impacts on 
project 
owners/SMEs 
0 

+/- 
Reduced 
availability of 
capital to 
invest due to 
need to 

Impacts on 
asset managers 

Effectiveness 

0 

0 

- 
Additional 
administrative 
costs to process 
redemptions and 
maintain 

- 
On balance while 
this would allow 
easier 
redemptions, 
overall it would 

41 

 
 
 
 
 
 
 
 
 
Option 3 
Optional 
liquidity 
window 
mechanism 

+/- 
Investors have 
possibility to 
redeem but 
need to match 
with new 
entrants 

liquidity 

have a negative 
outcome for 
managers and 
investors 

- 
May impose 
additional 
administrative 
or marketing 
costs on 
managers 

+ 
Balance between 
investor interests 
and flexibility to 
redeem offsets 
additional burden 
on managers 

pocket leading 
to a drag on 
the funds 
returns or sell 
assets to meet 
the 
redemption 
requests74 
+ 
Ensures there 
is no 
requirement to 
sell assets and 
limited 
liquidity drag 
on fund 
returns 

maintain 
liquidity 
which may be 
outweighed by 
ELTIF fund 
inflows 

+ 
Ensures 
maximum 
available 
capital for 
investment; 
overall higher 
funds 
channelled 
through 
ELTIFs as 
these become 
more 
attractive  

Legend: +++ = Very positive  ++ = Positive  + = Slightly positive   +/-  =  Mixed  effect                

0 = no effect 

- = Slightly negative 

-- = Negative 

--- = very negative 

7. 

PREFERRED OPTIONS AND IMPACTS OF THE PROPOSED POLICY OPTIONS 

7.1. 

Preferred options 

7.1.1.  Providing  clearer  separation  of  ELTIF  fund rules  when  marketed  solely  to 

professional investors 

The  preferred  option  is  Option  3,  i.e.  differentiation  between  ELTIFs  marketed  to 
professional  investors  and  ELTIFs  to  which  retail  investors  can  have  access.  The 
preferred  option  will  envisage  more  flexibility  for  those  ELTIFs  marketed  solely  to 
professional investors.  

In particular, the key changes that will be introduced in connection with  the need for a 
greater  flexibility  for  professional  investors  only  ELTIFs,  are  provisions  of  the  ELTIF 
Regulation  that  would  allow  for  greater  leverage,  greater  leeway  in  terms  of  portfolio 
composition  rules  and  asset  diversification  requirements  (essentially  allowing  for  more 
concentrated portfolios), and reduce the currently high threshold of those eligible assets 
that is  currently required by the ELTIF  Regulation.  In addition,  the ELTIFs that would 
solely be marketed to professional investors would no longer be required to have in place 
a  2-weeks  withdrawal  period  and  the  KID  applicable  for  retail  investors,  and  the 
arrangements and procedures in place to process complaints by retail investors. 

74  
In  certain  cases,  such  as  ELTIFs  that  are  focused  on  certain  types  of  portfolio  strategies  (transport 
infrastructure or real assets), the adverse effects on the remaining investors may be less severe due to the capacity of 
some ELTIFs to generate free cash flows which, in certain circumstances, may be used to honour redemption requests. 
This nuance may also be relevant in the context of the analysis of Option 2 for “project owners” and “the efficiency” 
assessment considering the impact of having more readily redeemable on the possibility to raise more capital. 

42 

 
 
 
 
 
 
 
 
                                                           
Due  to  the  existing  restrictions  and  additional  limitations,  it  is  important  maintain  the 
proportionality  of  requirements 
the  diversification  requirements  and 
concentration limits. 

regarding 

7.1.2.  Removing  demand-side  limitations  for  investments  in  ELTIFs  by  retail 

investors 

Option  2  is  considered  preferred.  This  option  would  introduce  two  main  changes  in 
ELTIF regime. The  first is the deletion of the EUR 10,000 minimum initial investment 
(the so-called “entry ticket”) required by the ELTIF Regulation. Easing such restrictions 
by allowing retail investors to commit lower amounts to an ELTIF is expected to speed-
up ELTIFs’ uptake and funding channelled through ELTIFs.  The second change would 
delete  the  limitation  of  10%  aggregate  investment  amount  for  those  retail  investors 
whose portfolio does not exceed EUR 500,000. The purpose of this amendment would be 
to  eliminate  the  threshold  that  is  judged  by  the  industry  participants  as  subjective  and 
essentially unenforceable.  

ELTIF  requirements  pertaining  to  the  assessment  of  retail  investor's  knowledge  and 
experience should be further clarified. Current provisions of the ELTIF Regulation oblige 
that  ELTIF  manager  to  assess  whether  the  ELTIF  is  suitable  for  marketing  to  retail 
investors,  and  conduct  a  suitability  test  assessing  the  retail  investor's  knowledge  and 
experience,  financial  situation  and  investor’s  investment  objectives.75  Stakeholders 
appear  to  overwhelmingly  prefer  MiFID  II  framework  to  a  self-standing  sectoral  and 
partially  duplicative  ELTIF  suitability  framework.76  As  the  ELTIF  will  remain  a 
“complex”  investment  product  even  if  marketed  to  a  retail  investor  audience,  the 
necessary suitability test – to be amended and aligned with that under MiFID II – could 
remove  any  degree  of  uncertainty  and  further  reinforce  the  investor  protection, 
accompanied by all relevant risk disclosure documents (including sustainability), etc. 

7.1.3.  Optional liquidity window mechanism for redemptions 

The preferred approach is to introduce additional optional liquidity windows mechanism 
that would allow for the exit of the ELTIF investors without compromising the liquidity 
position of the fund. Redemptions would only be permitted, at the discretion of the asset 
manager  and  solely  if  the  liquidity  window  mechanism  is  set  out  in  the  fund 
documentation and the prospectus, to the extent that a corresponding subscription interest 
was available to match the redeeming existing investors’ units or shares in an ELTIF (see 
Annex 7 for more details).77 

75  
In this connection, it should be noted that Article 30(1) of the ELTIF Regulation sets out that “the units or 
shares  of  an  ELTIF  may  be  marketed  to  retail  investors  on  the  condition  that  retail  investors  are  provided  with 
appropriate  investment  advice  from  the  manager  of  the  ELTIF  or  the  distributor”.  Stakeholders  have  called  for  an 
explicit  amendment  of  the  rules for  internal  assessment  process  for  ELTIFs  marketed  to  retail  investors  (Articles  27 
and  28  of  the  ELTIF  Regulation  by  streamlining  suitability  test  requirements  and  avoid  duplications  with  MIFID  II 
(Articles 16(3) and 25(2)). See High-Level Forum Report on the CMU, page 39. 
76  
Ibid, page 39. MiFIDII has often been cited by stakeholders as a well-understood and mainstream suitability 
assessment test. Even if and when the MiFIDII framework were to change, by virtue of the review, a cross-reference to 
the  MiFIDII  framework  would  ensure  the  stability  and  predictability  of  the  suitability  assessment,  as  well  as  have  a 
benefit of regulatory consistency across financial products. 
77  
The  revised  ELTIF  Regulation  would  contain  provisions  that  would  regulate  the  process  of  subscriptions, 
matching mechanism, redemptions, possible proration and pay-outs. In terms of subscriptions, there could be an option 
to open the fund for subscriptions and redemptions once every quarter, when the NAV is published, subject to a month 
notice  period.  These  subscription  requests  could  fund  redemption  requests  from  existing  investors  and,  if  the  total 

43 

 
 
 
 
 
 
 
                                                           
Introducing a liquidity 
window redemption 
mechanism 
+ 
More flexible redemption 
options will encourage more 
investors to consider ELTIFs 
as an investment product 
thereby increasing business 
opportunities for fund 
managers. At the same fund 
managers may choose not to 
incorporate the mechanism 
into their fund rules 
+ 
More flexible redemptions 
will allow more retail 
investors to invest in ELTIFs 
as they may be able to exit 
earlier than the funds 
maturity 
+ 
More flexible redemptions 
will encourage greater 
investor participation in 
ELTIFs 

The  following  table  compares  the  options  against  the  objectives  listed  in  section  4.  In 
addition,  it  assess  the  efficiency  and  their  impact  on  SMEs.  The  economic, 
environmental, social and fundamental rights impacts and their coherence with EU policy 
objectives are also considered. 

Table 8 – Aggregate comparison of options 

Objective  

Improve the 
attractiveness of 
the ELTIF 
regime for asset 
managers 

Differentiation between 
professional and retail 
ELTIFS 
++ 
Allowing more flexibility in 
the funds rules will increase 
the usability and attractiveness 
of ELTIFs 

Removing barriers to retail 
investor access to ELTIFs 

 + 
Reducing barriers to retail 
entry will widen the 
available investor base and 
encourage more fund 
managers to establish 
ELTIFs  

Facilitate access 
for retail 
investors while 
preserving 
investor 
protection 

Increase the size 
of the ELTIF 
market and 
overall funding 
channelled via 
ELTIFs 

Efficiency (cost-
effectiveness) 

0 
Retail ELTIFs will still be 
subject to more stringent fund 
rules for investor protection 
than professional funds. 

++ 
Reducing barriers to entry 
will make it easier for retail 
investors to participate in 
ELTIFs 

+ 
Allowing more retail 
investors to access ELTIFs 
will increase the investor 
base and investments 

++ 
More flexible fund rules will 
allow managers to implement 
more diverse portfolio and 
investment strategies 
increasing the product 
offering for all investors 
+ 
Reduced compliance costs for 
managers particularly those 
establishing professional only 
ELTIFs 

Impact on SMEs  + 

Greater availability of ELTIF 
funds for investment in SMEs 

+ 
Removing entry tests will 
reduce compliance costs for 
both managers and investors 

+/0 
More retail investors’ capital 
could be channelled into 
SMEs through ELTIFs 

- 
The additional redemption 
mechanism may lead to 
increased admin costs for 
managers 
+ 
More investors will increase 
the flow of capital to ELTIFs 
for investment in SMEs 

Other economic, 
environmental, 
social and 
fundamental 
rights impacts 

+/0 
More investors and 
availability of ELTIFs on the 
market will lead to increased 
investment in social and 

+ 
More investors and 
availability of ELTIFs on the 
market will lead to increased 
investment in social and 

0 
More investors and 
availability of ELTIFs on the 
market will lead to increased 
investment in social and 

amount of new subscriptions is insufficient to meet the volume of redemption requests, redemption orders would be 
reduced on a pro-rata basis. To be clear, any such redemptions would not come at the cost of the remaining investors of 
the  fund  (i.e.  where  an  asset  manager  would  have  to  liquidate  assets  or  deplete  the  cash  cushion,  or  borrow  cash  at 
expense of the remaining investors), but only on account of the funds raised from the new subscribing investors. 

44 

 
 
 
 
 
 
                                                                                                                                                                            
Coherence with 
EU policy 
objectives 

environmental projects 
++ 
Aligned with overall CMU 
strategy to continue building 
internal market for financial 
services and ensure strategic 
independence of the EU 

environmental projects 
+ 
Aligned with overall CMU 
strategy to encourage retail 
investment participation 
while ensuring adequate 
investor protection 

environmental projects 
0 
The redemption mechanism 
is only relevant for ELTIFs  

Legend: +++ = Very positive  ++ = Positive  + = Slightly positive   +/-  =  Mixed  effect                

0 = no effect 

- = Slightly negative 

-- = Negative 

--- = very negative 

7.2. 

Estimated impacts 

Stakeholder groups directly affected by the lack of uptake of ELTIFs are asset managers, 
investors  and  qualifying  undertakings  (such  as  unlisted  SMEs,  listed  small-cap 
companies  or  investee  companies  that  own  respective  projects  or  long-term  assets)  in 
which  ELTIFs  invest.  The  proposed  changes  aim  to  revert  this  trend  and  to  scale  up 
ELTIF market to reap its potential.  

At the same time, it is important to note the relatively limited size of the ELTIF market 
and that even with the proposed amendments improving the utility and attractiveness of 
the ELTIF, it will still take time for the market  to  increase in  size from its current  low 
level.  

However, the original objectives remain valid and the ELTIF framework still has distinct 
advantages  over  standard  AIFs  that  make  it  particularly  relevant  to  support  the  real 
economy and meet investors’ long term investment and saving needs.  

7.2.1.  Economic impacts 

ELTIFs  provide  long-term  financing  to  infrastructure  projects,  unlisted  companies,  or 
listed  SMEs  that  issue  equity  or  debt  instruments.  ELTIFs  can  complement  or  replace 
bank  financing  in  addition  to  other  investment  funds  (such  as  AIFs,  EuSEFs  and 
EuVECAs).  The  cost  of  funding  is  fundamental  for  undertaking  new  development 
projects.  If  the  cost  of  funding  decreases,  companies  will  be  able  to  undertake  new 
projects with positive consequences for the broader economy.  

While  ELTIFs  alone  cannot  address  all  of  the  financing  challenges,  developing  the 
market will complement the CMU Action Plan and support further development of this 
sector.  Since  ELTIF  eligible  investment  assets,  such  as  infrastructure,  intellectual 
property,  vessels,  equipment,  machinery,  aircraft  or  rolling  stock,  and  immovable 
property,  generate  an  economic  and  social  benefit,  higher  investments  channelled 
through ELTIFs are expected to contribute to smart, sustainable and inclusive growth and 
to the Union's energy, regional and cohesion policies.  

In terms of the economic segments, regardless of whether ELTIFs target or specialise in 
infrastructure  investment,  investments  in  unlisted  SMEs  or  in  airplane  or  marine 
financing,  the  ELTIF  regime  has  a  broad  range  of  applications.  For  example,  the 
envisaged  rules  on  investment  policies  (portfolio  composition  and  diversification, 
concentration  limits,  limits  on  cash  borrowing  –  see  for  further  detail  Annex  7)  or  the 
envisaged rules on redemption policies are designed to apply to all categories of ELTIFs, 

45 

 
 
 
 
 
 
 
 
 
 
whether  they  specialise  in  providing  equity  participations  for  infrastructure  or  whether 
they invest in real assets directly (airplane or ship finance). In light of the above, ELTIFs 
provide  a  useful  investment  structure  with  well-regulated  fund  rules  that  facilitate  and 
complement  existing  funding  sources  and  strategies  and  the  achievement  of  the  CMU 
objectives. 

7.2.2.  Social impacts 

The review of the ELTIF legal framework is unlikely to have a direct impact on social 
issues.  An  indirect  impact  might  however  relate  to  the  financing  of  long-term 
investments,  such  as  social  housing  projects  or  infrastructure  spending.  Social  housing, 
for instance, is included in the scope of eligible assets as part of the real estate category. 
Investment  funds  can  provide  financing  to  social  housing  projects  or  associations 
responsible for managing social housing properties. Investment funds appear to be well-
placed  to  offer  solutions  to  substitute  or  complement  bank  financing  and  the  preferred 
option  is  expected  to  lead  to  increased  funding  available  to  such  projects  through 
ELTIFs.  Another  indirect  impact  might  be  on  the  employment  in  the  companies  that 
attract investment from ELTIFs.  

By providing financing to these companies, they could secure existing jobs or create new 
employment opportunities, as well as promote regional development. Measuring precise 
social impacts might prove difficult due to substitution effects (understanding the origins 
of  investment  inflows  and  a  recourse  to  an  alternative  fund  structures)  and  lack  of 
transparency on detailed holdings of ELTIFs. 

There  are  also  other  indirect  social  impacts  arising  from  better  transport  and  social 
infrastructure  and  the  positive  externalities  (both  in  terms  of  employment,  energy 
efficiency  and  sustainable  projects,  etc.)  related  or  stemming  from  such  long-term 
investments.  However,  such  indirect  social  impacts  cannot  be  quantified  with  high 
certainty. 

7.2.3.  Impacts on SMEs 

Further uptake in the ELTIF sector is expected to have positive indirect impacts for the 
financing of SMEs. SMEs represent one of the core assets in which ELTIFs can invest. 
This  can  be  achieved  either  by  providing  loans  or  by  acquiring  equity  participations  in 
such  companies.  SME  financing  varies  by  phase  of  development.  Typically  these 
companies rely on private financing for driving growth and expansion, given the costs or 
barriers  to  public  financing.  While  banks  remain  a  main  source  of  such  financing, 
investment funds and other market-based funding vehicles have an important role to play 
as well. 

Access to funding for a SME is fundamental for undertaking new development projects. 
Should the access to funding decrease, SMEs will be less able to undertake new projects. 
ELTIFs  will  not  address  all  of  the  challenges  SMEs  face  in  accessing  financing,  but  it 
can contribute to a wider range and depth of alternative sources of financing, alongside 
banks. ELTIFs have the potential to increase the overall amount of funds going into long-
term assets. Should the money invested in ELTIFs increase, it is likely that SMEs would 
benefit from more available financing possibilities. This is particularly the case given that 
investments  into  SMEs  loans  and  equity  are  two  of  the  main  asset  classes  targeted  by 
funds. 

46 

 
 
 
 
 
 
 
 
7.2.4.  Environmental impacts 

The  ELTIF  framework  has  potential  to  contribute  promoting  the  green  and  resilient 
energy  transition  in  the  Union  and  can  complement  EU  policy  initiatives  in  this  field. 
Increasing funding options for long-term projects can be expected to aid the development 
of  environmental  projects  and  sustainable  growth  given  the  inclusion  of  sustainability 
criteria  for  certain  eligible  assets.78  This  would  complement  the  investments  in  green, 
smart  and  sustainable  growth.  It  is  difficult  to  measure  the  exact  impact  that  ELTIFs 
could have but as an example the ELTIFs could represent an added value for helping to 
finance environmental projects where, for example, bonds issuance or bank financing are 
excessively costly or impracticable. 

7.2.5.  Impacts on fundamental rights 

The ELTIF framework would be applied in accordance with those rights and principles, 
and the targeted amendments in the ELTIF regime would not have any consequences or 
adverse effects on the exercise of fundamental rights or consumer protection rights.  

7.2.6.  Impacts on simplification and/or administrative burden 

The contemplated changes to the ELTIF framework aim at addressing existing pain point 
in  the framework  and expected to  make it more  attractive for ELTIF  fund managers to 
start  and  operate  ELTIFs.  Overall,  the  review  is  not  expected  to  lead  to  an  increase  in 
regulatory  or  administrative  burdens.  On  the  contrary,  the  revised  ELTIF  legal 
framework  should  lead  to  a  more  efficient  regulatory  regime  with  lower  administrative 
burdens  (e.g.  less  rules  to  comply  with  for  retail  investors).  Compliance  costs  and 
regulatory  burdens  are  ultimately  expected  to  be  lower.  The  review  of  the  ELTIF 
framework will not have any material impact on public administrations. 

7.2.7.  Impact on financial stability 

Overall,  there  are  reduced  financial  stability  risks  associated  with  ELTIFs.  This  is 
explained by a number of factors, including by the fact that ELTIFs are and would likely 
remain essentially  closed-ended long-term  funds with  limited redemption  opportunities. 
In addition, ELTIFs have a very modest size (EUR 2.4 billion out of multi-trillion euros 
EU  AIF  industry).  Further,  the  use  of  depositaries  has  a  clear  mitigating  factor  in 
assessing  financial  stability  implications.  Against  this  background,  the  balance  sheet  of 
the depositaries in  the  Member States concerned could  be deemed  respectable to  allow 
them honouring their duties in taking up the role and tasks of a depositary for investment 
funds with a much more sizeable AuM.  

Furthermore, given that all ELTIFs are AIFs by definition, and given the links with the 
AIFMD  it  is  appropriate  to  consider  the  application  of  financial-stability  related 
provisions of the latter to the ELTIFs. The AIFMD contains extensive tools for improved 
macro-prudential monitoring and supervision. AIFMs are required to report on the main 
AIF  exposures,  its  liquidity  profile  and  leverage.  While  the  granularity  of  the  reported 

78  

This would nevertheless not apply to and thus not limit investments in assets that are already eligible. 

47 

 
 
 
 
 
 
 
 
 
 
                                                           
data  could  be  increased,  the  information  sharing  supports  effective  macro-prudential 
supervision and can help identify and mitigate potential financial stability risks79.  

Importantly, as per the existing AIFMD requirements, potential risks arising from the use 
of leverage should be addressed by managing leverage appropriately with respect to the 
investment and any potential maturity or currency mismatches in the portfolio. It would 
be, as per the AIFMD, the requirement of the asset manager to take into consideration the 
potential  risks  that  high  leverage  could  pose,  including  to  financial  stability,  as  per  the 
applicable AIFMD provisions. 

7.2.8.  Impact on third countries 

The asset management sector is a global market, managers and investors are located all 
around the globe and investments are made on a cross border basis inside but also outside 
the Union. As far as AIF managers are concerned, third countries play an important role. 
The ELTIF Regulation explicitly sets out that such investments should not be prevented. 
Long-  term  investments  in  projects,  undertakings,  and  infrastructure  in  third  countries 
can also bring capital to ELTIFs and thereby benefit the European economy. 

As  such,  third  country  qualifying  undertakings  are  explicitly  recognised  as  eligible 
investments  within  the  meaning  of  the  ELTIF  Regulation.80  The  review  of  the  ELTIF 
product  rules  represents  an  opportunity  for  AIF  managers,  for  foreign  undertakings,  as 
well  as  for  European  investors  alike.  Should  third  country  undertakings  and  their 
respective jurisdictions of establishment comply with all provisions set out in the ELTIF 
Regulation,  they  will  be  able  to  benefit  from  the  inclusion  in  the  asset  portfolios  of 
ELTIFs under the conditions set out in the ELTIF Regulation. 

From this perspective, the ELTIF framework also represents an added value for potential 
investment  targets  domiciled  in  third  countries.  Should  the  focus  on  long  term  assets 
increase, it is to be expected that long term assets domiciled in third countries may also 
benefit from an increased demand. Investments in third country undertakings might bring 
distinct benefits to the ELTIF managers and investors in terms of broader availability of 
eligible  assets  and  the  “thematic”  funding  exposure  of  European  investors  to  the 
economic and sustainable growth of third countries.  

7.2.9.  Substitution effects 

Should and once there is a successful uptake in ELTIFs substitution effects (i.e. where do 
investment  inflows  come  from)  might  arise.  Notably,  the  revised  ELTIF  regime  may 
draw  investments  from  those  currently  investing  in  AIFs  and  from  those  currently 
investing in other existing long-term instruments, including national funds. It would also, 

79  
.  The  European  Securities  and  Markets  Authority  (ESMA)  publishes  an  Annual  Statistical  Report  on  EU 
AIFs,  which  aggregates  supervisory  reporting  data  and  provides  market  participants  and  investors,  as  well  as 
supervisors  and  policy  makers,  with  information  on  market  developments.  ESMA  Annual  Statistical  Report  EU 
Alternative Investment Funds 2019, 21.01.2019, ESMA 50-165-748. 
80  
Article 11 of the ELTIF Regulation also conditions such investments to those third countries that are not a 
high-risk  and  non-cooperative  jurisdiction  identified  by  the  Financial  Action  Task  Force  and  that  have  signed  an 
agreement with the home Member State of the manager of the ELTIF and with every other Member State in which the 
units  or  shares  of  the  ELTIF  are  intended  to  be  marketed  to  ensure  that  the  third  country  fully  complies  with  the 
standards  laid  down  in  Article  26  of  the  OECD  Model  Tax  Convention  on  Income  and  on  Capital  and  ensure  an 
effective exchange of information in tax matters, including any multilateral tax agreements. 

48 

 
 
 
 
 
 
 
 
                                                           
as  a  new  fund  opportunity  for  investors  unable  currently  to  target  ELTIFs,  generate 
additional investments.  

It  is  difficult  to  assess  the  balance  between  these  different  elements.  Substitution  for 
investments  by  retail  investors  is  not  likely  to  be  great,  as  the  investment  profile  of 
ELTIFs  may  be  significantly  different  across  AIFs  (especially  given  the  fact  that  the 
availability of AIFs to retail investors is subject  to national law of the Member States). 
Given  that  ELTIFs  would  channel  investments  to  long  term  assets,  and  these  other 
vehicles are rather more diffuse and varied in their asset allocations, increased allocations 
to ELTIFs would be expected to increase overall funding available to long-term assets.81 

7.2.10. Distributional effects (between different fund markets) 

In addition to the above-mentioned substitution effects, distributional effects (i.e. which 
fund  managers  or  jurisdictions  will  benefit  the  most,  and  who  might  be  impacted 
negatively) might also arise. From the perspective of the investment target, deeper capital 
pools  (taken  from  across  the  EU),  would  likely  permit  further  specialisation  and 
differentiation 
targeting  markets  so  far 
underdeveloped  due  to  the  collective  impact  of  market  fragmentation.  From  the 
perspective  of  the  investor,  an  ELTIF  framework  equipped  with  the  passporting  rights 
could make such investments available to all investors across the EU. This would replace 
a situation in which options for such investments are only available in certain markets for 
certain investors. 

in  fund  offerings, 

including  vehicles 

Benefits  for the core markets  in  the EU might  be expected to  be less  prominent, to  the 
extent  that  these  markets  already  have  access  to  national  fund  regimes.  However 
fragmentation  in  these  regimes  and  patchy  focus  on  long-term  investments  means  that 
even  in  these  core  markets,  increased  capital  flows  to  ELTIFs  would  be  expected  to 
increase  funding  for  long  term  assets  compared  to  existing  national  funds.  A  deeper 
capital pool for ELTIFs would, as noted, permit deeper differentiation and specialisation 
in  that  fund  market,  thereby  permitting  investment  types  that  are  currently  most 
constrained to develop further.82  

8. 

REFIT (SIMPLIFICATION AND IMPROVED EFFICIENCY) 

The  initiative  aims,  in  part,  to  reduce  regulatory  costs  ELTIF  managers  and  ELTIFs 
associated with restrictive fund rules and the hurdles for investors in accessing ELTIFs. 

Overall,  the  proposed  amendments  to  the  ELTIF  regime  are  expected  to  introduce 
additional  flexibility  and  alleviate  the  burden  on  fund  managers  that  provide  products 

81  
For institutional investors currently not holding long term assets or where such assets are under-represented 
on  their  portfolios,  a  well-functioning  ELTIF  market  would  make  such  investments  easier,  more  transparent  and 
cheaper.  Asymmetries  of  information  would  be  reduced.  The  availability  of  transparent  vehicles  targeting  long-term 
funds that are known to be well regulated can therefore be expected to increase institutional allocations to long term 
assets.  This  might  see  a  minor  redistribution  move  away  from  shorter-term  liquid  assets  (short term  bonds,  and  to  a 
lesser  extent  equities),  towards  longer-term  assets.  Even  small  shifts  in  institutional  portfolio  allocations  could  have 
strong impacts on the ELTIF market given the scale of these portfolios. 
82  
Better  economies  of  scale  and  benefits  for  existing  players,  driven  by  new  market  opportunities,  could 
benefit  dominant  EU  fund  domiciliation  jurisdictions  (Luxembourg,  Ireland,  France  and  Germany).  However,  the 
regime might also be expected to permit new entrants to the market, thereby increasing competition. 

49 

 
 
 
 
 
 
 
 
                                                           
tailored to the needs of professional clients, while reducing hurdles of accessing ELTIFs 
for investors (while maintaining existing investors protections) will reduce administrative 
burdens and improve its attractiveness of ELTIFs for asset managers and investors alike. 

At  the  same  time  it  is  important  to  note  that  it  would  prove  challenging  to  precisely 
quantify regulatory cost reductions of the preferred options due to several factors. Given 
the limited size of the ELTIF universe and the confidential nature of fund level cost data, 
it would be required to make a set of assumptions and extrapolate the effects of possible 
cost  reductions  of  the  proposed  measures  by  relying  on  a  set  of  quantitative  and 
qualitative assessments of the proposed measures.  

In  addition,  it  should  be  recalled  that  the  ELTIF  is  a  voluntary  legal  regime.  Notably, 
there is no obligation for asset managers to choose the ELTIF as a fund structure. Instead, 
asset managers can choose to “opt in” establishing an ELTIF. Instead, they would be free 
to  establish  the  fund  as  a  standard  AIF  under  the  AIFMD83  or  any  alternative  national 
fund structures, or structuring their long-term investments through other means (such as 
private  equity  investments).  Given  those  substitution  and  distributional  effects  (see 
Section 7.2.9. and 7.2.10.), it would prove challenging to authoritatively substantiate any 
potential  or  implied  cost  savings  of  preferred  policy  options  with  a  sufficient  level  of 
conviction. 

Finally,  the  open  public  consultation  has  explicitly  inquired  public  stakeholders  on  a 
number of occasions about the costs and burdens of certain provisions and requirements 
of  the  ELTIF  regime84.  Nevertheless,  despite  various  attempts  to  collect  numeric 
information on the costs and cost savings of certain policy choices, little information was 
provided, which could partially be explained by the abovementioned inherent limitations 
of  the  ELTIF  regime  (limited  fund  sample,  opaqueness  of  the  sector,  confidentiality 
constraints and the voluntary nature of the ELTIF framework). This, however, implicitly 
indicates that cost of compliance with ELTIF rules is not such a pain point for relevant 
stakeholders as their restrictive nature. 

9. 

MONITORING AND EVALUATION 

Robust monitoring and evaluation  mechanism is  crucial to  monitor the effectiveness  of 
the ELTIF regime and to track the progress of the uptake of the ELTIF regime. Proper 
monitoring is also crucial in ensuring that the regulatory actions undertaken are effective 
in  achieving their respective objectives  and that  market  participants comply with  them. 
At the same time, such system has to be proportionate and avoid unnecessary burdens for 
the regulated entities, notably given the limited size of ELTIF market so far 

It should be acknowledged that the existing ELTIF regime already has in place a system 
of monitoring and evaluation. Competent authorities shall monitor collective investment 

83  
In this context, it should be recalled that in parallel with the ELTIF review the Commission is carrying out a 
review of the AIFMD framework. European Commission. Source: https://ec.europa.eu/info/law/better-regulation/have-
your-say/initiatives/12648-Financial-services-review-of-EU-rules-on-alternative-investment-fund-managers_en 
(18 
May 2021). 
84  
The  term  “costs”  was  used  10  times  throughout  42  questions  of  the  questionnaire.  A  dedicated  question 
targeting stakeholders feedback on identifying the provisions of the ELTIF framework that could be amended, and if so 
how, in order to lower costs and reduce compliance, administrative or other burdens was included in the open public 
consultation. 

50 

 
 
 
 
  
 
 
                                                           
undertakings established or marketed in their territories. In addition, a system of checks 
and controls exists to verify that they do not use the designation ‘ELTIF’ or suggest that 
they  are  an  ELTIF  unless  they  are  authorised  under,  and  comply  with,  the  ELTIF 
Regulation. In addition, the ELTIF register which is maintained by ESMA and compiled 
upon  the  information  and  notifications  by  NCAs  is,  in  itself,  a  robust  monitoring  and 
evaluation  mechanism.  This  register  gives  access  to  a  ranger  of  information  on  each 
authorised ELTIF, including the ELTIF manager, the date of authorisation, the Member 
State of the domicile (together with the respective NCA), the Member States in which an 
ELTIF is being marketed, as well as an LEI number. 

Full  granular  information  is  (readily)  available  to  NCAs.  The  ELTIF  framework  is 
focused on gathering data necessary for effective supervisory oversight of activity in the 
sector. Such data is distinct from broader market data such as costs that is more relevant 
from a policy making perspective. While funds may voluntarily offer such information, 
in practice it is regarded as business sensitive and confidential. This limits the ability to 
carry out a full quantitative cost analysis of the initiative. However, the preferred policy 
options  are  designed  to  alleviate  the  ELTIF  rules  and  increase  the  flexibility  for  fund 
managers. 

NCAs are, as a matter of their authorisation mandate and oversight functions, fully aware 
of the identity of the ELTIF manager (i.e. all the information on the manager and internal 
rules  and  procedures  related  to  the  authorised  manager)  and  an  ELTIF  for  which 
authorisations are being filed with NCAs.85 In addition to that, NCAs have complete up-
to-date  access  to  fund-related  quantitative  data,  i.e.  identification  of  underlying  assets, 
current and historic data on net asset values of such assets, full accounting information, 
portfolio  composition  data,  adherence  to  concentration  requirements,  level  of  leverage 
applied at both fund and asset level, and key changes that can take place at both fund or 
asset manager level. Such oversight functions are available and are actively exercised by 
NCAs at the entire life of ELTIFs from authorisation throughout the life cycle of ELTIFs. 
This  also  involves  the  reporting  duties  by  ELTIF  managers  arising  from  the  ELTIF 
Regulation and from the AIFMD. The data collected through the reporting requirements 
is enabling the NCAs to continue effectively supervising the ELTIF market.  

Proportionality needs to be ensured: Robust monitoring and evaluation mechanism is 
crucial to monitor the effectiveness of the ELTIF regime and to track the progress of the 
uptake  of  the  ELTIF  regime.  Proper  monitoring  is  also  crucial  in  ensuring  that  the 
regulatory  actions  undertaken  are  effective  in  achieving  their  respective  objectives  and 
that  market  participants  comply  with  them.  At  the  same  time,  such  system  has  to  be 
proportionate and avoid unnecessary burdens for the regulated entities, notably given the 
limited size of ELTIF market so far.86  

Enhancements to the ELTIF register are being envisaged: Currently the constitution 
of  the  ELTIF  register  by  ESMA  is  based  on  self-reporting  by  the  NCAs  which  has 

85  
Such  information  includes  information  on  the  statutory  documentation  (prospectus,  key  information 
document,  incorporation  documentation,  financial  projections  and  business  plan,  types  of  investors  to  whom  ELTIF 
would be marketed, jurisdictions in which ELTIFs will be marketed per each ELTIF share class), all key policies and 
procedures (such as leverage related guidelines, conflict of interest related guidelines, remuneration-related guidelines, 
written  agreement  with  the  depositary,  information  on  delegation  arrangements,  if  any,  and  information  about  the 
investment strategies, the risk profile and other characteristics of AIFs that the EU AIFM is authorised to manage). 
86  
It  should  be  considered  that  exposing  ELTIFs  to  additional  reporting  requirements,  on  the  top  of  already 
those  reporting  requirements  to which  they  are  subject  by  virtue  of  the  AIFMD,  could  prove  disproportionate.  Even 
more, that could be seen as effectively a detractor from the appeal of ELTIFs for asset managers. 

51 

 
 
 
 
 
                                                           
exposed  a  number  of  transparency  problems  and  inefficiencies.  ELTIF  Regulation’s 
provisions  regarding  the  ELTIF  register  will  mandate  that  updates  to  the  register  are 
carried  out  with  higher  frequency,  transparency  and  more  granularity.  This  will  ensure 
more transparency and higher visibility of the ELTIF regime.87 It is contemplated to give 
ELTIF register a higher  visibility (a self-standing searchable database as  opposed to  an 
Excel file at ESMA’s website), timeliness (updates to be introduced on a rolling basis as 
opposed to quarterly basis) and granularity.  

Commission  services  will  continue  monitoring  the  ELTIF  market:  While  the 
Commission will be responsible for monitoring the take up of the legislation according to 
EU law, the proposed indicators will require the input and assistance of Member States, 
NCAs,  ESMA  and  market  participants.  In  addition  to  available  public  sources  and 
licenced databases (such as Morningstar and Refinitiv), these are unlikely to satisfy the 
requirements and will not provide a full coverage of all ELTIFs. As part of a wider effort 
to  monitor  the  uptake  of  ELTIFs,  the  Commission  services  will  continue  monitoring 
development  of  the  ELTIF  market  in  general,  as  well  as  the  specific  impacts  of  the 
regulatory adjustments put forward in this initiative but also to observe the developments 
of  the  ELTIF  market  more  widely.  This  will  help  to  also  evaluate  the  impact  of  the 
regulatory and non-regulatory measures that form the contribution of the ELTIF review 
to the overall CMU Action Plan package. 

Against this background, and given the focus of this review initiative to boost the ELTIF 
sector,  it  is  therefore  appropriate  to  complement  the  evaluation  programme  in  terms  of 
monitoring the outputs, results and impacts of this initiative. The monitoring programme 
shall set out the means by which and the intervals at which the data and other necessary 
evidence will be collected. It shall also specify the action to be taken by the Commission, 
by  the  Member  States  and  by  ESMA  in  collecting  and  analysing  the  data  and  other 
evidence. 

At the same time, such system has to be proportionate and avoid unnecessary burdens for 
the regulated entities, notably given the limited size of ELTIF market so far. 

In  terms  of  indicators  and  sources  of  information  that  could  be  used  during  the 
evaluation,  the  data  provided  from  the  national  competent  authorities  (NCAs)  will  be 
used.  Since  NCAs  are  responsible  for  granting  authorisation  to  ELTIFs  and  to  the 
managers  of  ELTIFs,  NCAs  are  in  the  possession  of  the  information  on the  number  of 
ELTIFs,  their  domiciles,  and  jurisdictions  where  the  funds  would  be  marketed,  the 
information  on  the  pursued  strategies  and  underlying  assets,  key  fund  documentation 
(including the prospectuses), etc.88  

87  
More particularly, it would be appropriate to request that the ELTIF register includes information on the size 
of net assets, portfolio compositions, availability of ELTIFs to distinct categories of investors (marketing of ELTIFs to 
retail  and  professional  investors),  date  of  authorisation  and  date  of  withdrawal  of  authorisation  (to  cater  for 
survivorship  bias),  and  other  metrics  and  characteristics  (size  and  structure  of  fees,  performance,  etc.  which  can  be 
collected on the basis of the analysis of prospectuses and certain fund documentation, such as funds’ annual reports). 
88  
Furthermore, according to the ELTIF Regulation, the NCAs of the ELTIFs shall, on a quarterly basis, inform 
ESMA of granted or withdrawn ELTIF authorisations. Based on this information, ESMA should keep a central public 
register  identifying  each  authorised  ELTIF,  the  manager  of  the  ELTIF  and  the  competent  authority  of  the  ELTIF. 
Certain  information  from  trade  associations  and  data  providers  (Morningstar,  etc.)  can  constitute  another  important 
source of information that can be used. 

52 

 
 
 
 
 
 
                                                           
As part of a wider effort to monitor the uptake of ELTIFs, the Commission services will 
continue  monitoring  the  effects  of  the  preferred  policy  options  on  the  basis  of  the 
following non-exhaustive list of indicators: 

-  Number of authorised ELTIFs; 
-  Size of net assets of ELTIFs; 
- 

Jurisdictions where ELTIFs are domiciled and jurisdictions in which ELTIFs are 
marketed; 

-  Portfolio compositions (i.e. overall diversification and allocation to distinct asset 
classes eligible under the ELTIF regime, such as equity, debt, real assets, etc.); 
-  Availability of ELTIFs to distinct categories of investors (marketing of ELTIFs to 

retail and professional investors); 

-  Leverage  employed  (leverage  at  both  fund  level  and  overall  leverage  level 

achieved via encumbrances of assets);  

-  Date of authorisation and date of withdrawal of authorisation; 
-  Other  metrics  and  characteristics  (size  and  structure  of  fees,  performance,  etc. 
which  can  be  collected  on  the  basis  of  the  analysis  of  prospectuses  and  certain 
fund documentation, such as funds’ annual reports). 

The above list of non-exhaustive indicators is designed to not only monitor the specific 
impacts of the regulatory adjustments put forward in this initiative but also to observe the 
developments  of  the  ELTIF  market  more  widely.  This  will  help  to  also  evaluate  the 
impact  of  the  regulatory  and  non-regulatory  measures  that  form  the  contribution  of  the 
ELTIF review to the overall CMU Action Plan package. 

While  the  Commission  will  be  in  charge  of  monitoring  the  take  up  of  the  legislation 
according to EU law, many of the indicators set out would require input and assistance of 
Member  States,  NCAs,  the  European  Securities  and  Markets  Authority  and  market 
participants.  Many  data  requirements  for  these  indicators  can  only  be  fully  met  via 
respective inputs from NCAs and ESMA. While the Commission may be able to collect 
parts  of  the  data  via  public  sources  and  licenced  databases  (such  as  Morningstar  and 
Refinitiv),  these  are  unlikely  to  satisfy  the  requirements  and  will  not  provide  a  full 
coverage of all ELTIFs.  

53 

 
 
 
 
 
 
 
 
ANNEX 1: PROCEDURAL INFORMATION 

1. 

Lead DG, Decide Planning and CWP references 

Directorate-General  for  Financial  Stability,  Financial  Services  and  Capital  Markets 
Union.  

Agenda planning reference: PLAN-2020-8416 

2. 

Organisation and timing 

The initiative is included in the Commission Work Programme 2021. 

3. 

Inter-Service Steering Group 

Work on the Impact Assessment started in mid-2019 with the legal and policy evaluation 
of the ELTIF framework, the analysis of the ELTIF market and a series of meetings with 
market participants. On 4 February 2020, the Commission services have also participated 
in  the  ELTIF  colloquium  with  a  broad  range  of  market  participants  (asset  managers, 
product manufacturers, legal and auditing professionals, credit institutions, etc.).  

The  Inter-Service  Steering  Group  was  formed  by  representatives  of  the  Directorates 
General Competition (COMP), Economic and Financial Affairs (ECFIN), Internal market 
Industry  Entrepreneurship  and  SMEs  (GROW),  Justice  (JUST),  Communications 
Networks  Content  and  Technology  (CONNECT),  Taxation  and  Customs  Union 
(TAXUD), ENER, CLIMA, the Legal Service (LS) and the Secretariat General (SG).  

The  1st  ISSG  meeting  took  place  on  29  July  2020.  The  meeting  was  attended  by 
representatives of DGs  FISMA, COMP,  ECFIN, GROW, JUST, TAXUD, CLIMA and 
SG.  

The 2nd ISSG meeting took place on  30 November 2020. The meeting was attended by 
representatives of DGs  COMP,  FISMA, ECFIN, GROW, JUST, CONNECT, TAXUD, 
ENER, CLIMA, LS and SG. 

The  3rd  ISSG  meeting  took  place  on  7  May  2021.  The  meeting  was  attended  by 
representatives  of  DGs  FISMA,  ECFIN,  TAXUD,  CLIMA,  LS  and  SG.  Based  on  the 
presentation  of  the  ELTIF  review  and  the  submitted  documentation  to  the  ISSG,  the 
participating  DGs  have  given  an  overall  support  to  the  review  initiative  and  ongoing 
policy work.  

The  4th  ISSG  meeting  took  place  on  3  June  2021.  The  meeting  was  attended  by 
representatives  of  DGs  FISMA,  ECFIN,  GROW,  JUST,  TAXUD,  CLIMA  and  SG. 
Following the update on the progress of the drafting of the Impact Assessment document 
and  a  short  overview  of  the  structure  and  key  policy  areas  of  the  Impact  Assessment, 
ISSG members were invited to provide their feedback. Main comments raised during the 
discussion were as follows: 

  Impacts  on  SMEs  and  administrative  burdens  of  the  optional  redemptions 
liquidity  window:  Substantial  improvements  were  made  to  the  draft  Impact 
Assessment. DGs welcomed the fact that the impact on SMEs was spelled out in 

54 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
the  options  comparisons.  Regarding  the  third  option  on  the  optional  redemption 
policy  that  indicated  that  investors  may  send  a  withdrawal  notice  to  fund 
administrator,  it  was  also  suggested  to  specify  that  the  redemption  mechanics 
might  prove  complicated  for  some  (retail)  investors.  This  could  be  achieved  by 
adding more nuanced considerations in the comparison table.  

  Targeted  improvements  on  the  structuring  and  format:  SG  noted  an  overall 
improvement in the quality of the drafting. However, the drafting could further be 
improved  in  certain  areas.  It  was  recommended  to  include  more  detailed  on  the 
specific  fund  rules  for  investor  categories.  In  addition,  a  section  of  the  Impact 
Assessment  regarding  the  redemption  policy  cited  some  stakeholders’  views. 
However, it would be preferable to describe stakeholders’ input more extensively 
to better understand industry’s views on this topic. Finally, certain sections of the 
Impact  Assessment  could  be  shortened  (e.g.  fundamental  rights).  It  was  also 
recommended 
to  add  a  paragraph  on  financial  stability  and  respective 
implications on financial stability.  

  Taxation and economic factors in the ELTIF  regime:  Citing  a section of the 
Impact Assessment regarding an example of discrimination in the tax area, it was 
suggested  to  refrain  from  assessing  Member  States’  tax  incentive  schemes  as 
those  schemes  can  also  be  liable  for  other  regulatory  issues,  such  as  state  aid, 
discrimination, etc.  

DG FISMA commented on each issue raised during the roundtable of comments and has 
committed to reflecting respective remarks in the revised draft of the Impact Assessment. 
The deadline for written comments was set to 7 June 2021.  

4. 

Consultation of the Regulatory Scrutiny Board 

The  Upstream  Regulatory  Scrutiny  Board  (RSB)  meeting  took  place  on  4  December 
2020. The RSB delivered a  positive opinion with recommendations  to  further improve 
the outline of the Impact Assessment. More specifically, the Board raised the issue of the 
problem  analysis  and  questioned  the  possibilities  of  other  regulatory  responses. 
Furthermore,  the  Board  provided  remarks  on  the  outline  of  the  problem  tree  and 
questioned the specifics of the ELTID industry given that most long-term projects were 
structured  via  other  vehicles.  The  Board  has  also  recommended  to  further  substantiate 
problems surrounding the limited amount of market data available on ELTIF funds.  

The  draft  Impact  Assessment  report  was  submitted  to  the  RSB  on  11  June  2021.  The 
RSB hearing took place on 7 July 2021.  

Based  on  the  additional  information  provided  ahead  of  the  hearing,  the  RSB  issued  a 
positive  opinion.  The  Board’s  recommendations  on  the  Impact  Assessment  are 
summarised below: 

  To show the growth potential of ELTIFs, the report should present information on 
the recent increase in their uptake. It should clarify the relative importance of the 
problems identified in the report and of national taxation for their future growth. 

55 

 
 
 
 
 
 
 
 
 
 
  The  report  should  better  describe  the  link  with  parallel  initiatives  and  should 
incorporate  relevant  evolutions  in  the  baseline.  Options  should  reflect  more 
clearly  the  problems  and  their  relative  importance.  The  report  should  analyse 
options on the protection of retail investors in a more granular way. In particular, 
it should elaborate the minimum required investment for retail investors. It should 
clarify  how  fund  rules  will  be  diversified  between  professional  and  retail 
investors, without legal separation. 

  The report should distinguish views of different stakeholder groups more clearly 
throughout the report, including in the annexed presentation of stakeholder input 
and the evaluation. 

  The  comparison  of  options  should  use  the  standard  assessment  criteria 
(effectiveness,  efficiency  and  coherence)  and  more  systematically  identify  all 
affected groups in the summary of impacts. 

  The report should clarify the reasons for the data gaps in the report. In view of the 
limited  evidence  base  of  the  annexed  evaluation,  it  should  explore  how  to 
improve future monitoring. 

The Board requested that these recommendations were into account before launching the 
interservice consultation. 

In order to address the Board’s comments additional information and analysis, including 
on  recent  uptake  of  ELTIFs,  was  incorporated  into  the  Impact  Assessment.  Relative 
importance  of  the  identified  problems  was  clarified.  In  Annex  5  the  links  with  the 
AIFMD, MIFID II and Solvency reviews were explained in greater detail.  

The practical implementation of the proposed distinction between retail and professional 
only ELTIFs was also expanded. Annex 2 was revised with additional information on the 
public  consultation  and  stakeholder  feedback  and  further  clarification  of  the  data  gaps 
inserted. 

5. 

Sources and evidence used in the impact assessment  

The  Commission  held  an  open  public  consultation  related  to  this  initiative.  The 
consultation  was  an  opportunity  for  all  stakeholders  (EU  citizens,  Member  States, 
ESMA,  NCAs,  financial  institutions,  asset  managers,  investors  etc.)  to  provide  their 
views on the risks and opportunities related to the review of the ELTIF framework and 
the need for action. It  also presented  a range of possible solutions to address the issues 
raised  by  stakeholders.  The  answers  to  the  public  consultation  were  published  on  the 
EUSurvey  portal.  Annex  2  provides  further  information  on  the  outcome  of  the  open 
public consultation. 

This  impact  assessment  is  based  primarily  on  stakeholder  consultations  and  additional 
desk research of the Commission services. In line with the general principles in the Better 
Regulation  guidelines  on  the  need  for  evidence-based  impact  assessments,  the 
Commission will collect evidence through several sources.  

The Commission has notably relied on: 

56 

 
 
 
 
 
 
 
 
 
 
 
  “A  New  Vision  for  Europe’s  Capital  Markets:  Final  Report  of  the  High  Level 
Forum on the Capital Markets Union”, dated 10 June 202089, which has called for 
a targeted review of the ELTIF Regulation with a view to strengthen the ELTIF 
passport,  encourage  more  participation  from  retail  investors  through  more 
flexibility  in  redemptions  or  tax  incentives,  as  well  as  broaden  the  scope  of 
eligible assets and investments while taking into due account investor protection.  
  Analysis  of  the  existing  legislative  framework,  in  particular  the  ELTIF 
Regulation,  the  Commission  Delegated  Regulation  (EU)  2018/480,  Directive 
2011/61/EU on Alternative Investment Fund Managers (AIFMD), the Prospectus 
Regulation  (EU) 2017/1129  and the PRIIPS Regulation  (EU) 1286/2014  (where 
marketing of the ELTIFs also to retail investors within the meaning of the ELTIF 
Regulation  takes  place),  as  well  as  ESMA’s  work  in  developing  draft  RTS90  to 
determine the costs disclosure requirements applicable to ELTIF managers. 

  The  proposal  for  a  Regulation  on  European  Long-term  Investment  Funds 
(COM(2013)  462  final)  dated  26  June  201391,  as  well  as  the  Commission  Staff 
Working  Document  -  Impact  Assessment  accompanying  the  proposal  for  a 
Regulation on European Long-term Investment Funds (COM(2013) 462 final)92. 
  The  content  of  the  European  Commission’s  2012  public  consultation  on 
investment funds93 with a dedicated section on long-term investments, as well as 
a  dedicated  informal  questionnaire  of  201394,  which  the  Commission  services 
circulated amongst professional stakeholders to gather further input, including the 
analysis  of  over  50  responses  by  private  and  public  entity  stakeholders  on  the 
subject-matter 

  The  content,  feedback  and  the  respective  documentation  surrounding  the  public 
consultation  on  cross-borders  marketing  of  investment  funds95  (UCITS,  AIF, 
ELTIF, EuVECA and EuSEF) across the European Union, as  well as follow-up 
legislative proposals and policy actions. 

  Excerpt  from  the  ESMA  fact-finding  questionnaire  on  EU  ELTIFs,  with 
breakdowns on the name of the NCAs, name of the ELTIF manager, name of the 
ELTIF, Member State of the domicile and Member States in  which ELTIFs  are 
marketed. 

  Analysis  of  the  ESMA  alternative  investment  funds  register96,  ESMA  central 
database  of  European  Social  Entrepreneurship  Funds  (EuSEF)  managers97  and 

Source: https://www.esma.europa.eu/sites/default/files/library/esma-34-46-89_-_cpcost_on_eltif_rts_3.pdf (3 

Source: 

Source: 

Source: 

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52013SC0230&from=EN 

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52013PC0462&from=EN 

89 
https://ec.europa.eu/info/sites/info/files/business_economy_euro/growth_and_investment/documents/200610-cmu-
high-level-forum-final-report_en.pdf (3 March 2021). 
90  
March 2021). 
91  
March 2021).  
92  
March 2021). 
93  
94  
760/legislative-history_en (3 March 2021). 
95  
document_en.pdf (3 March 2021). 
96  
2021). 
97  
2021). 

Source: https://ec.europa.eu/commission/presscorner/detail/en/IP_12_853 (3 March 2021). 
Source: 

Source: 

Source:  https://registers.esma.europa.eu/publication/searchRegister?core=esma_registers_eusef  (3  March 

Source:  https://registers.esma.europa.eu/publication/searchRegister?core=esma_registers_upreg  (3  March 

https://ec.europa.eu/finance/consultations/2016/cross-borders-investment-funds/docs/consultation-

https://ec.europa.eu/info/law/european-long-term-investment-funds-eltifs-regulation-eu-2015-

(3 

(3 

57 

 
 
                                                           
ESMA  central  database  of  European  Venture  Capital  Funds  (EuVECA) 
managers.98 

  European  Commission’s  report  dated  10  June  2020  assessing  the  scope  and  the 
functioning of the AIFMD (COM(2020) 232 final)99 and respective Commission 
Staff Working Document (SWD(2020) 110 final)100 assessing the application and 
the scope of the AIFMD. 

  Analysis of the scope of the European Green Deal (Communication, COM(2019) 
640 final,  dated 11 December 2019101) and the extent to  which ELTIF  structure 
and financial tools could be employed as a pass-through vehicle to facilitate the 
funding in the green transition in the public and the private sector. 

  Documentation surrounding the CMU Action Plan, including the Communication 
from the Commission on “Capital Markets Union: Progress on Building a Single 
Market  for  Capital  for  a  Strong  Economic  and  Monetary  Union”102  dated  15 
March 2019. 

  Publications and position papers by the EIB and EIF in the area of SME funding 

and long-term growth. 

  Publicly available documentation on some existing ELTIFs, such as prospectuses, 
Key Investment Documents (KID), annual reports and other related documents. 
  Analysis  of  academic  and  commercial  publications  on  the  topic  of  the  practical 
issues  pertaining  to  the  functioning  of  the  ELTIF  framework,  long-term 
investments  in  the  EU,  and  policy  aspects  in  the  area  of  SME,  infrastructure 
financing, real estate and lending. 

  Analysis of policy  and regulatory approaches to  facilitate  growth and long-term 
investments,  including the  legislation put  in  place in  other jurisdictions, such as 
the  UK  Investment  Trust  legislation  and  the  U.S.  Business  Development 
Company (BDC) model to finance small business. 

  Market  data  on  the  size,  asset  flows  and  respective  stakeholders  in  the  field  of 
long-term investments by using Morningstar and Refinitiv (Eikon) databases. 
  Publicly  available  reports,  studies,  surveys,  position  papers  and  other  relevant 

 

documents drawn up by private and public stakeholders;  
Input  from  workshops,  bilateral  meetings  and  consultation  with  Member  States 
and industry stakeholders, including asset managers, product manufacturers, retail 
investors  representatives  and  investment  funds  active  in  the  field  of  long-term 
investments;  

  The results of the public consultation targeting all interested parties. 

In addition to the abovementioned sources, the Commission services have used recourse 
to a serious of consultations: 

  The  Commission  has  consulted  the  Expert  Group  of  the  European  Securities 
Committee (EGESC) on two occasions, i.e. 27 November 2020 and on 19 July 2021. 
The  Commission  has  also  liaised  with  the  EIB  given  the  role  of  ELTIFs  as  an 

Source:  https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52020DC0232&from=EN 

Source:  https://registers.esma.europa.eu/publication/searchRegister?core=esma_registers_euveca  (3  March 

98  
2021). 
99  
March 2021). 
100  
https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/200610-aifmd-
application-scope-working-document_en.pdf (3 March 2021). 
101  
102  

Source: https://ec.europa.eu/info/sites/info/files/european-green-deal-communication_en.pdf (3 March 2021). 
Source: https://ec.europa.eu/finance/docs/policy/190315-cmu-communication_en.pdf (3 March 2021). 

Source: 

(3 

58 

 
 
 
                                                           
investment  vehicle  through  which  the  EIB  Group  may  channel  its  European 
infrastructure or SME financing.  

  Following  the  consultations  of  ESMA,  the  Commission  services  continued  to  liaise 

with NCAs, as well as the ESMA Investment Management Standing Committee. 

  Stakeholders’ colloquium on European long-term investment funds (ELTIFs) entitled 
“ELTIF  -  Challenges  and  Opportunities  in  2020”  held  on  4  February  2020  (over  40 
participants primarily from Luxembourg’s and European industry participants). 

  ELTIF workshop organised by the French Asset Management Association held on 7 

December 2020 (over 60 participants across a broad spectre of stakeholders). 

  ELTIF  workshop  organised  by  AIMA  on  2  February  2021  regarding  the  regulatory 
experience of the functioning of the U.S. Business Development Corporations (BDCs) 
and their similarities with ELTIFs (around 15 participants). 

  ELTIF  workshop  organised  by  EuropeInvest  with  the  representatives  of  the  private 

equity industry on 27 May 2021 (around 20 participants). 

7. 

Implementation plan 

Article  37(2)  of  the  ELTIF  Regulation  mandates  that  the  Commission’s  report  to  the 
European Parliament and to the Council should be accompanied, where appropriate, by a 
legislative proposal.  

Since  the  ELTIF  Regulation  is  a  directly  applicable  and  legally  binding  piece  of 
secondary  EU  legislation,  an  amended  ELTIF  Regulation  and  respective  Level  2 
regulations  would  not  per  se  require  implementation  beyond  those  implementation 
measures (i.e. mainly competences of NCAs and sanctions) already being put in place. 

59 

 
 
 
 
 
 
 
 
ANNEX 2: STAKEHOLDER CONSULTATION  

1.  

Background 

In  order  to  collect  further  evidence,  the  Commission  was  seeking  for  the  main  reasons 
behind the slow uptake in ELTIFs across the Union, as well as  stakeholder suggestions 
for  an  improved  functioning  of  the  ELTIF  regime.  Reasonable  efforts  have  been 
undertaken  to  collect  and  analyse  available  evidence  both  through  the  public 
consultation, bilateral stakeholder feedback and the review of industry research papers.  

Public stakeholder consultation: the ELTIF public consultation has attracted 54 formal 
responses.  

  The  Impact  Assessment  has  incorporated  and  taken  into  account  the 
feedback  of  different  stakeholder  groups,  including  fund  managers,  investor 
representatives, NCAs and wider public (academics, citizens, etc.). 

  There  is  a  broad  agreement  among  fund  managers  (small  nuances  arise 
depending on the specialisation, jurisdiction of domicile and specific investment 
strategy  pursued)  that  key  deficiencies  of  ELTIFs  lie  in  the  limited  scope  of 
eligible  assets  and  investments  and  tangible  barriers  to  the  effective  access  of 
investors  to  ELTIFs.  Both  these  areas  are  effectively  targeted  in  the  Impact 
Assessment and the ELTIF initiative at large. 

  There is a broad consensus among NCAs about the key topics which need to 
be  revised  (eligible  assets,  numeric  thresholds,  conflict  of  interest  provisions, 
etc.).  This  consensus  has  been  reflected  in  the  ESMA’s  technical  advice  which 
close  to  fully  coincides  with  the  policy  proposals  set  out  in  the  Impact 
Assessment.103  The  alignment  of  the  investor  protection  measures  is  however 
aligned  with  the  broader  retail  investment  strategy,  which  is  currently  being 
prepared by the Commission  Services. NCA’s have so far  broadly supported its 
objectives of ensuring consistency between the frameworks by eliminating gaps, 
overlaps and inconsistencies. 

  Selected  representatives  of  investors  (e.g.  representatives  of  retail  investors, 
representatives  of  institutional  investors  acting  in  real  assets  space  and 
representatives  of  insurance  and  pension  funds  associations)  have  advocated  for 
similar targeted improvements of the ELTIF framework. 

Follow-up  consultation  directed  at  existing  ELTIF  managers:  In  total,  54  formal 
responses  were  received  via  the  Commission’s  Better  Regulation  portal.  Several 
responses  to  the  open  public  consultation  were  provided  outside  the  formal  submission 
channels  and  some  submissions  were  made  after  the  deadline.  Several  of  such 
submissions (or ex post consultations) were made by representative of ELTIF managers. 

Limitations of regulatory data:  Ideally, the Commission services would have liked to 
analyse a wide range of data pertaining to the registered ELTIFs, including their granular 
portfolio  breakdowns,  performance,  total  effect  of  costs  (regulatory  fees,  compliance 
costs,  search  and  administrative  costs),  fees  and  charges,  as  well  as  other  information 

103  
The key area where the Impact Assessment goes beyond ESMA’s technical advice is the area of dismantling 
barriers  to  access  for  retail  investors  (on  which  certain  concerns may  be  raised  by  Italy,  France  and  Sweden,  whilst 
some  other  Member  States  –  Germany,  Ireland,  Luxembourg,  etc)  were  supportive  of  the  removal  of  the  barriers  to 
access by retail investors. 

60 

 
 
 
 
 
 
 
                                                           
related to the operation of ELTIFs. Due to the fact that a large portion of this information 
is  only  available  to  the  NCAs  supervising  the  ELTIF  manager,  there  has  been  certain 
reluctance  to  request  the  ELTIF  managers  to  disclose  this  information  in  its  entirety 
citing  confidentiality  and  business  secrecy  concerns  (even  if  anonymised  the  small 
population size would make it easy to know the identity of an ELTIF), as well as the fact 
that such a request for non-mandatory data would expose the ELTIFs and their managers 
to unwanted and undue administrative burden. 

This Annex 2 provides an overview of the following stakeholders consultation activities 
based on the short version of the questionnaire of the open public consultation organised 
by the Commission services pending between 19 October 2020 and 1 February 2021. 

2. 

Description of the respondents and the questionnaire 

The consultation was pending between 19 October 2020 and 1 February 2021.  In total, 
54 responses were submitted. Some respondents provided feedback in a different format 
and  channels  other  than  that  required  by  the  official  public  questionnaire,  which  may 
slightly distort the statistics visible at the website of the Better Regulation Portal.  

The questionnaire consisted of two parts – the first 8 questions were predominantly open-
ended questions with limited selection choices, whilst the full questionnaire consisted of 
42 questions targeting the technical and specific ELTIF fund rules. 

The majority of  respondents  (49%) were business associations with  specific companies 
or  business  organisations  representing  the  second  largest  group  of  respondents  (24%). 
There  were  5  public  authorities  who  responded  to  the  public  consultation,  which 
represented  9%  of  all  respondents.  In  terms  of  size,  there  was  a  fair  mix  of  large 
stakeholders  (over  250  employees),  medium  (below  250)  and  small-size  stakeholders 
(respectively 34%, 21% and 36%). 

Most  respondents  had  international  mandate  (80%),  as  opposed  to  national  scope 
mandate  (20%).  In  addition,  there  was  a  rich  diversity  in  the  country  of  origin  of 
stakeholders,  as  exemplified  by  the  graph  below.  The  majority  were  stakeholders  from 
France and Italy (22.2% each), Germany and Belgium (11.1% each) and the UK (7.4%). 

61 

 
 
 
 
 
 
 
 
 
 
 
3. 

Respondents’ feedback to the short questionnaire and on eligible assets 

The feedback provided by stakeholders to the short ELTIF questionnaire on the 
functioning of the ELTIF regime could broadly be summarised through the following 
graphs: 

Graph 1: Respondents’ feedback on the overall functioning of the ELTIF regime  

Legend:  
Question 1. The ELTIF framework has been successful in achieving its objective of raising and channelling capital towards European 
long-term investments in the real economy 
Question 2. The scope of the ELTIF authorisation is appropriate 
Question 3: The costs of launching and operating an ELTIF, and the regulatory and administrative burdens are appropriate 
Question 4. The ELTIF regime is relevant to the needs and challenges in EU asset management 
Question 5. The existing ELTIF regime is consistent with the CMU objectives 
Question 6. The ELTIF regime has brought added value to investors in and the financing of long-term projects 
Question 7. The ELTIF investor protection framework is appropriate 

Graph 2: Respondents’ feedback on the functioning of ELTIF rules – per area 

62 

 
 
 
 
  
 
 
 
 
Legend: 
Question 1.   General princinples and definitions used in the ELTIF Regulation 
Question 2.   Market capitalisation threshold defining an SME equity or debt issuer 
Question 3.   Authorisation requirements 
Question 4.   Operational conditions 
Question 5.   Passportability of ELTIFs 
Question 6.   Rules pertaining to eligible investments 
Question 7.   Clarification and/or practical guidance on the eligibility requirements, notably in relation to investments in real assets 
Question 8.   Rules pertaining to the prohibition to undertake certain activities 
Question 9.   Rules concerning the qualifying portfolio undertakings 
Question 10.   Conflict of interests related rules, including the ban on co-investment 
Question 11.   Portfolio composition and diversification rules and their application 
Question 12.   Concentration limits 
Question 13.   Rules and limitations related to the borrowing of cash 
Question 14.   Redemption related rules and life-cycle of ELTIFs 
Question 15.   Rules concerning the disposal of ELTIF assets 
Question 16.   Transparency requirements 
Question 17.   Prospectus-related provisions 
Question 18.   Cost disclosure related rules 
Question 19.   Rules pertaining to the facilities available to investors for making subscriptions 
Question 20.   Requirements concerning the marketing and distribution of ELTIFs to investors 
Question 21.   Specific provisions concerning the depositary of an ELTIF marketed to retail investors 
Question 22.   Provisions and rules pertaining to the marketing of ELTIFs to retail investors 
Question 23.   Provisions integrating the EU Taxonomy for sustainable activities into the ELTIF framework 
Question 24.   Inconsistent or duplicative application of the ELTIF related requirements by Member States 
Question 25.   Issues arising from the supervisory practices within Member States 
Question 26.   Cross-border marketing related challenges 
Question 27.   Excessive reliance on distribution networks to market ELTIFs 
Question 28.   Excessive costs of setting up and operating ELTIFs 
Question 29.   Competition from existing national fund structures 
Question 30.   Taxation related issues 
Question 31.   Other aspects 

63 

 
 
 
 
Graph 3: Respondents’ assessment of the current ELTIF regime based on their impact 

Legend: 
Question 1.   Broad scope of eligible assets under the ELTIF regime 
Question 2.   Long-term and illiquid nature of the investments of an ELTIF 
Question 3.   Operational conditions 
Question 4.   Transparency requirements 
Question 5.   Availability of ELTIFs to retail investors 
Question 6.   Requirements and safeguards for marketing of ELTIFs to retail investors 
Question 7.   Validity of an authorisation as an ELTIF for all Member States 
Question 8.   Other aspects 

Graph 4: Respondents’ assessment of ELTIF framework on eligible assets and 
investments 

Legend: 
Question 1.   A minimum size eligibility requirement for real assets investments 

64 

 
 
 
 
 
 
Question 2.   A condition for an exposure to real estate through a direct holding or indirect holding through qualifying portfolio 
undertakings of individual real assets 
Question 3.   Limitation on eligible investment assets to ELTIFs, EuVECAs and EuSEFs 
Question 4.   Inability to invest in a “financial undertaking” 
Question 5.   EUR 500 000 000 threshold for investing in listed issuers 
Question 6.   Rules related to investments in third-country undertakings 
Question 7.   Other conditions and requirements related to eligible investment assets and qualifying portfolio undertakings 

4.   Types of investors and effective investor protection 

Questions  10  and  11.  Please  describe  key  barriers  to  the  development  of  the  ELTIF 
market, whether regulatory or of another nature, if any, to institutional investments that 
you consider reduce the attractiveness of the ELTIFs for institutional investors? 
Question  11.  Should  any  of  the  following  provisions  of  the  ELTIF  legal  framework  be 
amended,  and  if  so  how,  to  improve  the  participation  and  access  of  retail  investors  to 
ELTIFs? Please explain which of the following provisions should be amended and give 
specific  examples  where  possible  and  explain  the  benefits  and  disadvantages  of  your 
suggested approach, as well as potential effects and costs of the proposed changes. 

The  majority  of  respondents  indicated  that  the  size  of  the  initial  minimum  amount  for 
retail  investors,  and  net  worth  requirements  constituted  a  substantial  barrier  to  the 
development  of  the  ELTIF  market  (62%  as  opposed  to  24%  who  did  not  think  so); 
approximately  50%  and  53%  of  the  respondents  respectively  referred  to  specific 
requirements concerning the marketing of ELTIFs to retail investors (suitability test) and 
the  possibility  to  allow  more  frequent  redemptions  for  retail  investors  as  constituting 
barriers.  A  minority  of  stakeholders  expressed  the  view  that  the  current  minimum 
investment  size is  appropriate given the nature of ELTIF products  and their investment 
universe;  however further guidance around the monitoring and ongoing applicability of 
the net worth/portfolio requirements was necessary. That was attributed to the fact that, 
in practice these can be challenging to monitor given fluctuations in portfolio size over 
time and diverse nature of an individual’s holdings. In addition, the asset managers and 
the  ELTIF  distributor  would  not  necessarily  have  a  consolidated  overview  of  all  the 
individual  investor’s  holdings.  The  analysis  of  responses  indicated  that  these  two 
requirements,  including  the  10%  threshold  requirement  for  those  investors  whose 
financial portfolios were below EUR 500,000 constituted a major barriers for the uptake 
of  ELTIFs.  Overall,  the  stakeholders  have  called  for  the  removal  or  “easing”  of  such 
thresholds  (the  entry  ticket  to  be  lowered  to  EUR  1,000)  and  cited  their  detrimental 
effect,  especially  when  combined.  Such  stakeholders  also  argued  that  the  ELTIF 
Regulation’s UCITS-inspired diversification requirements (Article 13) and those related 
to  retail  marketing  and  target  market  identification  described  above  already  offered  an 
adequate degree of investor protection, such that the additional constraints on minimum 
investment  amounts  appears  superfluous.  Easing  such  restrictions  by  allowing  retail 
investors to commit lower amounts to an ELTIF will definitely speed-up funding and – 
where accompanied by tax incentives – also overcome their reluctance to “lock-up” their 
savings  in  a  long-term  investment  vehicle.  The  10%  limit  was  called  “artificial”  and 
unenforceable  and  there  were  several  calls  for  removing  the  10%  limit.  In  terms  of  a 
suitability  test  for  fund  distributors  to  administer  to  their  retail  clients,  the  majority  of 
respondents called for the Commission to aligning the present Article 28(1) requirements 
with the relevant provisions (Article 25) of the MiFID II regime, as the general standard 
for (non-complex) fund marketing in the Union. 
The  two-weeks  notice  period  was  described  as  a  barrier  only  32%  of  the  respondents, 
whilst  the  other  third  either  did  not  viewed  it  as  such  or  did  not  have  firm  views. 
Procedures and arrangements to deal with retail investors complaints triggered even less 

65 

 
 
 
 
controversy  (only  14%  of  respondents  viewed  them  as  barriers);  whereby  f)  provisions 
related to the marketing of ELTIFs were qualified as problematic by 56% of respondents. 

Question  12.  Which  safeguards,  if  any,  should  be  introduced  to  or  removed  from  the 
ELTIF  framework  to  ensure  appropriate  suitability  assessment  and  effective  investor 
protection, while considering the specific risk and liquidity profile of ELTIFs, including 
sustainability risks, investment time horizon and risk-adjusted performance? 

The majority of stakeholders viewed the current safeguards as appropriate and sufficient. 
In several instances, respondents observed that some the current safeguards appeared to 
be duplicative, and have the effect of severely, and unduly, limiting access by investors 
to  ELTIFs.  Several  stakeholders  went  beyond  and  argued  that,  on  the  contrary,  no 
additional safeguards were required and that such safeguards cold detract from the appeal 
of  ELTIFs.  In  the  view  of  such  respondents,  the  investor  protection  regime  should  be 
tailored to the specific needs of the clients. Were changes to be introduced to the ELTIF 
liquidity profile, it would prove essential that no additional requirements are introduced 
for those ELTIFs that are set up as closed-ended funds with limited redemptions rights.  

5.  

Conflict of interests related questions  

Question  13.  Are  mandatory  disclosures  under  the  ELTIF  framework  sufficient  for 
investors to make informed investment decisions? 

Almost 80% of those respondents who provided input to this question opined that those 
mandatory  disclosures  are  indeed  sufficient  for  taking  informed  investment  decisions. 
Around 15% responded  “Don’t  know /  no opinion /  not  relevant”. The prevailing view 
expressed by respondents was that the imposition of additional disclosure requirements 
on  ELTIF  managers  beyond  those  already  required  under  existing  rules  would  not  be 
either necessary or desirable given the additional burdens and the capacity to detract from 
the appeal of the ELTIF regime. 

Question  14.  Which  elements  of  mandatory  disclosure  requirements,  if  any,  should  be 
tailored to the specific type of investor? 

The  response  rate  and  the  level  of  argumentation  on  this  question  were  comparatively 
low, which exposed the fact that the issue of mandatory disclosure requirements was not 
deemed problematic by  the respondents.  There  were several  cross-links  to the previous 
question 13. Overall, it was emphasised that asset managers spend a considerable amount 
of  time  and  resource  preparing  suitable  disclosures  for  fund  investors  based  on  the 
features  of  the  fund.  Generally,  there  was  no  appetite  among  stakeholders  to  impose 
additional  disclosure  requirements  on  ELTIF  managers  beyond  those  already  required 
under existing rules or to tailor-make such disclosure requirements to different types of 
investors.  

Question 15. Are the ELTIF rules on conflicts of interest appropriate and proportionate? 
Please explain how you think how should such rules on conflicts of interest be amended. 
Please explain the benefits and disadvantages of the potential changes as well as costs, 
as well as how specifically such amendments could facilitate the effective management of 
conflicts of interests, co-investment strategies and indirect investment strategies: 

66 

 
 
 
 
 
 
 
 
 
 
Overall,  over  30  stakeholders  provided  feedback  on  this  question;  52%  of  respondents 
opined that the rules on conflicts of interest were not appropriate and proportionate, 16% 
deemed them appropriate and proportionate, whilst around 20% expressed no firm views 
(“Don’t  know  /  no  opinion  /  not  relevant”).  The  majority  of  respondents  focused  on  a 
range  of  concerns  identified  in  the  functioning  of  the  conflict  of  interest  rules  (notably 
Article 12) of the ELTIF regime. Predominantly their concerns were focused on the lack 
of coherent solution for the co-investment strategies (at both fund level and the level of 
senior  personnel)  and  the  limitations  of  the  ELTIF  fund  rules  relating  thereto.  Several 
such  stakeholder  provided  reasons  and  illustrations  (examples)  and  advocated  for  the 
refining and clarifying the provisions of Article 12 to provide a more flexible, principles-
based  approach  that  ensures  fair  treatment  of  investors  while  also  providing  asset 
managers with  greater certainty on how the conflict-of-interest provisions apply. It  was 
admitted  by  some  stakeholders  that  should  there  be  any  policy  objectives  or  scenarios 
which  require  more  specific  consideration,  they  could  better  addressed  in  Level  2  or  3 
measures. 
The minority of those stakeholder (16%) who opined that ELTIF rules set out in Article 
12 were appropriate did not provide for extensive explanation or argumentation.  

6.  

Borrowing of cash and leverage 

Question 16. Which of the following policy choices related to the leverage of the ELTIF 
funds do you find most appropriate: Increasing total allowed leverage, decreasing total 
allowed  leverage,  maintaining  the  current  leverage-related  rules  set  out  in  the  ELTIF 
regime intact, other, don’t know / no opinion / not relevant. Please explain your response 
to  question  16  with  the  description  of  the  advantages  and  disadvantages  of  your 
proposed approach, including its implications for ELTIF managers, the performance and 
risk  and  liquidity  profile  of  the  fund,  the  risk-adjusted  returns  of  investors  and  the 
attractiveness of the ELTIF regime. 

Out of 29 stakeholders who provided responses to this question, there was an equal split 
(28% and 28%) among those who preferred to maintain the current leverage-related rules 
set  out  in  the  ELTIF  regime  intact  and  those  who  advocated  for  an  increase  in  total 
allowed  leverage.  The  remaining  response  categories  “Don’t  know  /  no  opinion  /  not 
relevant” and “Other” represented 24% and 21% respectively. 

The prevailing arguments by those respondents advocating for an increased leverage, or 
an overall deletion  of the 30%  leverage threshold thus  aligning the ELTIF regime with 
that  of  the  AIFMD  was  that,  overall,  increased  flexibility  in  terms  of  leverage  will 
enhance  an  ELTIF’s  capability  to  better  support  the  financing  of  assets  (in  particular 
those  of  SMEs)  and  improve  a  fund’s  return  profile,  render  the  structuring  more 
attractive and provide more flexibility for the launch of an ELTIF. It has been argued that 
the  30%  restriction  of  borrowing  compared  unfavourably  with  other  retail  funds  (even 
such  as  the  highly  product-regulated  UCITS,  which  can  borrow  up  to  100%  of  their 
assets).  The  total  allowed  leverage  should,  in  the  opinion  of  the  respondents  in  this 
group,  therefore  be  increased  at  least  up  to  100%,  and  a  specific  option  for  certain 
ELTIFs  available  only  for  institutional  investors  to  exceed  this  subject  to  conditions 
being met around investment strategy, governance, investor base and oversight. Some of 
the  stakeholders  advocating  for  views  also  participated 
the 
recommendations by the High-Level Forum.  

the  work  on 

in 

67 

 
 
 
 
 
 
Importantly,  the  stakeholders  also  noted  that  as  per  the  existing  AIFMD  requirements, 
potential  risks  arising  from  the  use  of  leverage  should  continuously  be  addressed  by 
managing  leverage  appropriately  with  respect  to  the  investment  and  any  potential 
maturity or currency mismatches in the portfolio.  

An important perspective was provided by some private equity industry participants, who 
noted  that  private  equity  funds  are  essentially  closed-ended  funds,  which  are  often 
structured  as  limited  partnerships  and,  as  such,  private  equity  funds  are  not  typically 
leveraged and do not use leverage. As a result, in general, there was less inclination from 
private  equity  stakeholders  to  advocate  for  much  higher  leverage  thresholds.  Besides, 
ELTIF  managers  are  AIFMs,  subject  to  the  AIFMD,  which  includes  provisions  on 
leverage. 

It  was  an  opinion  of  several  stakeholders  that  even  if  the  borrowing  limits  were 
increased, such an increased borrowing does not automatically equate to increased risks 
for  investors.  Notably,  increasing  the  borrowing  limits  do  not  create  any  additional 
systemic risk as the ELTIF has a long term investment strategy and should not offer the 
possibility for investors mentioned above to benefit for an early redemption. 

Question  17.  What  should  be  the  optimal  maximum  allowed  net  leverage  allowed  for 
ELTIF funds? 

There were several cross-reference to responses to question 16 in which stakeholders set 
out a more qualitative assessment of this issue. Those stakeholders (minority view) who 
argued  that  the  leverage  rules  were  appropriate  indicated  30%;  those  stakeholders  who 
advocated for more leverage suggested at least a 100% borrowing limit for those ELTIFs 
which could be marketed to retail investors, and up to 200% (or removing the threshold 
altogether) for those ELTIFs that can solely be available to professional investors (citing 
the applicable AIFMD framework). 

Question 18. How should regulation of leverage for ELTIFs marketed to retail investors 
be  different  from  that  of  the  ELTIFs  marketed  solely  to  professional  investors?  Which 
safeguards are particularly relevant and appropriate, and why? 

In total, only 18 respondents provided feedback on this issue, which is less than 40% of 
all  respondents  to  the  public  consultation.  Out  of  these  respondents,  only  a  few  have 
provided a specific estimate of the potential threshold. Such stakeholders recommended 
that consideration is given to tiering depending on the type of investor i.e. professional or 
retail.  As  regards  those  ELTIFs  that  could  be  marketed  to  retail  investors,  a  minimum 
borrowing limits for ELTIF should, in the opinion of such respondents, be brought in line 
with UCITS (i.e. 100%). Some respondents argued that the current leverage-related rules 
set  out  in  the  ELTIF  Regulation  could  be  maintained  for  ELTIFs  marketed  to  retail 
investors; whilst managers should however have the possibility to  set a higher leverage 
threshold for ELTIFs marketed solely to professional investors (the recommended higher 
leverage  limit,  subject  to  conditions  and  supported  by  appropriate  governance,  was 
ranging from of 100% of NAV or, under certain conditions, up to 200% of NAV of the 
fund).  

The abovementioned tiering approach was questioned by a minority of respondents who 
argued that the risk tolerance of institutional investors was not higher by definition (the 

68 

 
 
 
 
 
 
 
 
understanding of the risk is generally higher) but should be assessed taking into account a 
generally higher tolerance for liquidity risk and longer duration.  

Question 19. Do the requirements related to the “contracting in the same currency” as 
the assets to be acquired with borrowed cash, maturity-related rules and other limits on 
the  borrowing  of  cash  constitute  significant  limitations  to  the  operations  and  leverage 
strategy of ELTIFs? 

Despite the fact that less than a third of stakeholders provided substantive feedback, the 
predominant and closely unanimous view was that the requirement of the ELTIF regime 
pertaining contracting in “the same currency” was deemed both ineffective in managing 
risk,  as  well  as  contributed  to  unnecessary  complexity.  Some  stakeholders  provided 
examples  of  assets  that  could  be  denominated  in  one  currency,  and/or  located  in  a 
country  with  one  currency,  but  would  be  traded  in  another  currency.  Similarly,  assets 
denominated in one currency would likely generate revenue streams in another currency. 
From an EU perspective, the stakeholders qualified the currency related requirement as 
potentially creating problems and frictions with relation to investments in non-euro area 
countries. There was a call by some respondents to allow the possibility to borrow in a 
different currency and opting for a more effective solution without compromising on the 
adequacy of the investor protection safeguards. 

Question 20. Please explain which regulatory safeguards, if any, you deem appropriate 
to ensure the effective management of liquidity, subscriptions and the financing of assets 
in the investment portfolio. In addition, please explain if you consider it appropriate to 
provide  for  any  alternative  regulatory  approach  for  the  borrowing  of  cash  rules 
specifically during the ramp-up period in the ELTIFs’ life. 

Only around a third of stakeholders provided submissions on this topic, with the majority 
of  respondents  providing  no  input  or  indicating  that  they  have  no  opinion  or  no 
experience in this area. Two key positions seemed to prevail: a large share of respondents 
who provided their input argued in favour of loosening some of the current restrictions 
on  borrowing  under  Article  16  of  the  Regulation.  Although  not  all  stakeholders  were 
capable to provide a better calibration for the present 30% threshold (there was a range of 
proposals  targeting  up  to  50%),  such  stakeholders  also  expressed  the  view  that  an 
ELTIF’s borrowing limit could temporarily exceed this threshold during the fund’s initial 
ramp-up  phase.  Another  substantial  portion  of  those  stakeholders  who  provided  input 
argued that no additional regulatory safeguards would be required to ensure the effective 
management  of  liquidity,  subscriptions  and  the  financing  of  assets  in  the  investment 
portfolio.  

7.  

Rules on portfolio composition and diversification 

Question  21.  Which  of  the  following  policy  choices  pertaining  to  the  ELTIF  rules  on 
diversification do you consider most appropriate? Please explain your response with the 
description  of  the  advantages  and  drawbacks  of  your  preferred  policy  approach.  In 
particular, should you consider that the diversification and portfolio composition related 
rules  under  the  ELTIF  Regulation  need  to  be  amended,  please  explain,  to  what  extent 
and why? 

A  total  of  30  respondents  (over  60%  of  all  stakeholders)  provided  submissions  in 
response to this question. 60% of those respondents indicated their preference in favour 

69 

 
 
 
 
 
 
 
 
of “fewer regulatory requirements and more flexibility by ELTIF managers with respect 
to  portfolio  composition  and  diversification”.  There  was  an  even  split  (13%  and  13% 
respectively) for those stakeholders who required “greater diversification” and indicated 
“other”  as  a  preferred  policy  option.  Only  7%  suggested  to  maintain  the  current  rules 
pertaining  to  the  portfolio  composition  and  diversification  set  out  in  the ELTIF  regime 
intact.  There  was  a  notable  degree  of  homogeneity  (and  possibly  coordination  of 
submissions)  among  those  respondents  advocating  for  a  the  reduction  of  regulatory 
requirements  and  increased  flexibility  y  ELTIFs  in  terms  of  portfolio  composition  and 
diversification.  In  general,  there  was  a  general  and  strong  pushback  against  the 
requirement  to  invest  more  than  10%  of  ELTIF  capital  in  other  any  single  ELTIF, 
EuVECA or EuSEF preventing the execution by ELTIFs fund of funds strategies. Such 
stakeholders strongly argued that investing through a fund of funds can provide investors 
with higher levels of diversification, lower volatility and an additional layer of screening 
and  diversification  resulting  in  tangible  benefits  to  retail  investors.  Further,  such 
stakeholders strongly advocated in favour of removing the concentration limits in relation 
to fund of fund structures so as to promote broader set of investment styles for investors 
to choose from, without diminishing diversification of the underlying assets. There was a 
recurring  topic  whereby  10%  capital  limitation  was  deemed  challenging,  especially 
during  the  ramp-up  period.  Importantly,  the  industry  participants  explicitly  insisted  on 
having  no  specific  diversification  requirements  imposed  on  ELTIFs  exclusively  sold  to 
professional investors. Whilst there were different arguments pertaining to the nature of 
diversification,  the  common  denominator  for  the  majority  view  was  that  the  10% 
diversification  limit  is  deemed  too  low  to  create  an  efficient  investment  portfolio  and 
deliver  potential  superior  returns  to  investors.  As  such,  the  majority  of  respondents 
proposed  to  increase  the  diversification  limits  in  Article  13  (a),  (b)  and  (c)  to  20%. 
Furthermore, the 25% concentration ratio was also deemed too restrictive as sometimes 
asset managers adopt structures under which they might be the sole or anchor investor in 
another fund. In addition, there was a range of arguments brought up to support funds of 
funds strategies and providing critical account of the ELTIFs regime’s appropriateness in 
that respect. 

In  general,  the  majority  of  arguments  elaborated  on  why  the  current  portfolio 
composition  criteria were regarded as too  narrow and made  it generally unappealing or 
unviable for fund managers, and particularly fund-of-funds managers, to set up ELTIFs. 
Overall, the removal or increasing the minimum thresholds was proposed as a plausible 
solution going forward. 

The minority of stakeholders opined that the Current diversification rules are appropriate 
for ELTIFs marketed to retail investors, except with regards to the ramp-up period (see 
answer  to  question  28).  Yet,  they  appear  to  be  too  stringent  compared  to  other  AIFs 
marketed to professional investors. These provisions could in particular prevent the fund 
from  implementing  specific  investment  strategies  though  in  line  with  the aspirations  of 
the Capital Market Union agenda – like growth capital, which can require to bring extra-
financing to portfolio companies at new stages of their development. These rules should 
therefore  be  significantly  relaxed  for  ELTIFs  marketed  to  professional  vehicles  only, 
leaving greater flexibility to the ELTIFs’ managers. 

Question 22. Do you consider the minimum threshold of 70% of eligible assets laid down 
in  Article  13(1)  of  the  ELTIF  Regulation  to  be  appropriate:  requiring  greater 
diversification;  requiring  less  diversification;  fewer  regulatory  requirements  and  more 
flexibility by ELTIF managers with respect to portfolio composition and diversification; 

70 

 
 
 
 
maintaining the current rules pertaining to the portfolio composition and diversification 
set out in the ELTIF regime intact; other. Please explain your position on your response 
by assessing the advantages and drawbacks of your preferred policy option pertaining to 
asset diversification rules. 

In  total,  30  responses  were  provided  with  the  majority  (43%)  replying  that  the  70%  of 
eligible  assets  threshold  was  not  appropriate  and  a  third  (33%)  approving  70%  as  the 
appropriate threshold (responding “yes”). The remaining stakeholders responded “Don’t 
know / no opinion / not relevant” and “other” (respectively 10% and 13% or responses). 
The  overwhelming  number  of  respondents  who  were  not  approving  the  70%  threshold 
were  of  the  view  that  the  threshold  was  excessively  high,  and  that  the  minimum 
investment  threshold  of  70  %  for  eligible  investment  assets  should  be  decreased  (a 
minority  of  such  respondents  advocated  for  a  complete  removal  or  “significant” 
reduction).  This  would,  in  the  view  of  those  stakeholders,  help  to  allow  differentiated 
investment  strategies.  Some  stakeholders  went  on  to  suggest  lowering  the  threshold 
(from  70  %  up  to  50%).  One  stakeholder  brought  up  an  explanation  for  the  50% 
investment 
threshold  and  cited  OPCIs  (French  real  estate  collective 
proposed 
undertakings) which have to reach a quota of 51% of non-listed real estate assets, as well 
as FCPR (French venture capital mutual investment funds) that are subject to a minimum 
investment quota of 50%. 

Indeed, it seems necessary to request ELTIF to hold a sufficient amount of liquid assets 
to be able to meet redemption requests when they offer regular possibilities to disinvest, 
up to 30 % of net asset value. From that perspective, a 70% minimum threshold may not 
be  appropriate  as  it  would  significantly  restrict  the  ability  of  the  ELTIF’s  manager  to 
hold  enough  liquid  assets.  An  interesting  and  useful  nuance  was  brought  up  by  some 
stakeholders that argued that institutional investors are less in need of protection in this 
respect  than  retail  investors  because  they  control  their  risk/return  requirements  across 
their  entire  portfolio.  Such  stakeholders  implied  that  the  reduction  of  the  threshold  for 
solely institutional investors oriented ELTIFs could be more substantial than that where 
the target investor base would comprise retail investors. 

A  minority  view  put  forward  by  the  respondents  was  that  the  current  eligible  assets 
threshold was appropriate. In the view of such respondents, the objective of the ELTIF 
framework is to promote long-term investment, focusing on illiquid assets. It is therefore 
necessary  to  maintain  a  high  minimum  threshold  of  eligible  assets  to  be  fulfilled  by 
ELTIF managers, so as to preserve the identity of this vehicle.  

8.  

Redemption rules and life of ELTIFs 

Question 23. Please provide a critical assessment of the impacts of the ELTIF Regulation 
rules on redemption policy and the life-cycle of ELTIFs, including the appropriateness of 
the  ELTIF  Regulation  for  the  structuring  of  the  ELTIF  funds,  taking  into  account  the 
legitimate  interests  of  the  investors  and  achieving  the  stated  investment  objective  of 
ELTIFs. 

Slightly over a half of all respondents provided feedback to this question. The prevailing 
view  expressed  by  respondents  (predominantly  asset  managers  associations)  was  that 
fixed end date of an ELTIF, and the inability for investors to be redeemed before the end 
date,  represented  weaknesses  of  the  ELTIF  framework.  In  the  opinion  of  such 
respondents, the inability for investors to redeem their parts in an ELTIF is a constraint 

71 

 
 
 
 
 
 
 
for  investors,  both  institutional  and  retail.  They  deemed  it  appropriate  to  create  some 
possibilities  for  early  redemption  during  the  life-cycle  of  an  ELTIF  with  a  view  to 
increase  the  attractiveness  of  the  ELTIF  as  an  investment  vehicle.  In  the  view  of  such 
stakeholders  (asset  managers  or  their  representatives)  expressed  the  view  that  the 
provisions  under  Article  18(1)  and  (3)  of  the  ELTIF  Regulation  –  as  further  specified 
under  Article  2  of  the  Delegated  Regulation  (EU)  2018/480  –  should  be  amended  by 
removing the limited life feature of the ELTIF and introducing a harmonized redemption 
terms 
respondents 
acknowledged  that  appropriate  liquidity  management  tools  should  complement  these 
amendments. 

(e.g.  quarterly,  semi-annually  or  even  annually).  Several 

A more nuanced variation to  this majority view  was a more pronounced  recognition  of 
the  potential  issues  arising  in  connection  with  the  increased  redemption  access  by 
investors.  In  the  view  of  such  stakeholders,  allowing  an  ELTIF  to  be  set  up  as  a 
permanent  capital  vehicle  (i.e.,  with  no  fixed  maturity  or  opting  for  an  “evergreen 
structure”) would overcome this issue. Such a structure would permit asset managers to 
focus  on  long-term  capital  appreciation  for  investors,  while  also  accommodating  the 
preference  of  some  investors  and  asset  managers  to  establish  these  structures  for  their 
investments. 

In  general,  private  equity  industry  representatives  were  less  inclined  to  advocate  for 
outright redeemability. This could be attributed to the fact that private equity ELTIFs are 
mainly  closed  ended  funds.  In  general,  these  funds  have  a  life  cycle  limited  in  time, 
between 10 to 15 years. In this context, investors would not have any redemption rights 
during the life cycle of the funds. The investors in such funds are well aware that their 
investments are locked over this period and do not seem to require liquidity. In addition, 
such respondents have implied certain flexibility already provided by the ELTIF regime 
(akin to the French retail private equity and venture capital funds that provide redemption 
rights in exceptional circumstances.  

Finally,  a  minority  view  was  that  the  current  rules  on  redemption  policy  and  the  life-
cycle of ELTIFs are fully appropriate. To that end, it was argued that excessive liquidity 
transformation should be avoided, in line with current provisions set out in Article 18 of 
the ELTIF Regulation. Individual stakeholders have also argued in favour of introducing 
additional  safeguards  in  the  ELTIF  regulation  or  its  delegated  acts,  to  avoid  regulatory 
arbitrage.  Examples  of  safeguards  could  be  minimum  proportion  of  liquid  assets  to 
address  redemption  requests  (which  might  require  to  relax  the  70  %  threshold);  initial 
lock-up period; liquidity management tools; stress tests to demonstrate the ability to face 
redemption requests in stress conditions.  

Question  24.  If  longer-term  investments  were  to  be  limited  only  to  those  with  certain 
maturities, what threshold might be considered appropriate: shorter maturity of between 
5 to 10 years Maturity of 5 years and more; only investments with a maturity +10 years; 
only  investments  with  a  maturity  +15  years;  other  possible  maturity;  don’t  know  /  no 
opinion  /  not  relevant;  please  specify  what  other  threshold  might  be  considered 
appropriate. 

The views on this question were provided solely by a half of the respondents to the open 
consultation  (27  responses  in  total),  and  out  of  them  the  vast  majority  (over  50%)  of 
respondents  indicated  “don’t  know  /  no  opinion  /  not  relevant”  as  an  answer.  The 
remaining  30%  of  respondents  indicated  “other  possibly  maturity”,  and  around  10%  of 

72 

 
 
 
 
 
 
stakeholders opting in favour of “shorter maturity of between 5 to 10 years”. Only 4% of 
respondents chose “Maturity of 5 years and more”. The answers to the question exposed 
the prevailing view that it does not appear relevant to set a general threshold as maturities 
would need to be adapted to the nature of the investments considered. Such stakeholders 
seemed  to  prefer  a  flexible  mandate  whereby  ELTIFs  would  maintain  a  long-term 
duration  of  the  investment  portfolio.  As  a  result,  such  stakeholders  expressed  the  view 
that there should be no prescriptive one-size-fits-all approach since the maturity of a fund 
would ultimately depend on the asset class, the investment strategy and the exit strategy 
(e.g.  private  equity  and  debt  assets  can  have  a  shorter  maturity,  while  real  assets  and 
notably infrastructure may have a very long maturity). It was recommended to leave the 
determination  of  the  adequate  maturity  to  the  ELTIF  manager  and  maintain  sufficient 
flexibility  in  the  ELTIF  Regulation  to  capture  various  types  of  long-term  assets,  rather 
than  imposing  any  strict  maturities  in  the  ELTIF  Regulation,  which  would  restrict  the 
possible per se of the ELTIF Regulation rather than enlarging it. 

Question 25. If shorter-term investments were allowed to be included into the portfolio, 
what  proportion  of  the portfolio should be permitted:  0% to  15%; 15% to 30%; above 
30%;  other  options;  don’t  know  /  no  opinion  /  not  relevant.  Please  specify  what  other 
proportion of the portfolio should be permitted. 

This question is related (and is partially an inverse supplementary question) to question 
22 on the appropriate weight of eligible assets. The views on this question were provided 
solely by a half of the respondents to the open consultation (27 responses in total), and 
out of them the vast majority (52%) has marked “don’t know / no opinion / not relevant” 
as a response. The remaining 19% of respondents indicated “15% to 30%”, and an even 
split of 7.5% choosing “0% to 15%” and 7.5% opting in favour of “above 30%”. Whilst 
the  views  expressed  could  not  be  deemed  conclusive,  some  stakeholders  demonstrated 
openness to lowering of the 70% threshold for ELTIFs, as it would have the advantage of 
opening  more  than  30%  to  assets  eligible  for  UCITS.  Contrary  to  that,  several 
stakeholders  noted  that  if  the  aim  was  to  create  funds  investing  in  long-term  duration 
assets, the part of short-term investments should act just as a risk buffer and this should 
not lead to the lowering of the 70% eligible assets threshold; doing so could, in the words 
of  one  stakeholder  “jeopardise  the  character  of  the  ELTIF”.  At  least  two  respondents 
noted that special rules  have to  apply in  the beginning and end of the ELTIFS lifetime 
(see analysis of responses regarding the ramp-up stage). 

Question  26.  Do  you  consider  that  “mid-term”  redemption  should  be  allowed?  Please 
explain your position on your responses and provide for advantages and disadvantages 
of your policy choice from the perspective of ELTIF managers, ELTIF liquidity and risk 
profile, returns of investors, and other regulatory aspects. 

Only around a third of respondents  who provided input to  the open public consultation 
have  clarified  their  position  pertaining  to  the  “mid-term”  redemptions  approach.  Th 
feedback was somewhat inconclusive and was approximately evenly split between those 
who viewed “mid-term” redemptions as a viable option, those who preferred alternative 
redemption approaches and those respondents who cited increased risks relating thereto. 
Several  stakeholder  generally  supported  the  view  that  “mid-term”  redemption  option 
would  make  an  ELTIF  more  attractive  to  investors.  They  noted  admitted  it  would 
potentially create liquidity management issues for the ELTIF manager and that liquidity 
management measures would need to be put in place to address such risks. 

73 

 
 
 
 
 
 
In  turn,  some  asset  managers  argued  that  –  rather  than  offering  a  possibility  for  a  one-
time  right  to  redeem  their  investments  “at  a  mid-point”,  as  proposed  by  the  HLF  in  its 
report on the CMU – the revised ELTIF regime should offer investors the possibility of 
regular or periodic redemptions (references were also made to “evergreen” structures). In 
the  view  of  such  stakeholders,  “mid-term”  redemptions  wouldn’t  provide  sufficient 
flexibility and would expose ELTIFs and their investors to a number of risks (which has 
been also acknowledged by the first group of respondents). 

A minority of views expressed warned explicitly against the introduction of “mid-term” 
redemptions  and  cited  the  risks  (including  to  investors)  related  thereto.  Notably,  in  the 
view of such stakeholders, in case of a mid-term redemption, the fund manager would be 
forced  to  liquidate  portfolio  assets  in  market  conditions  which  may  not  be  necessarily 
favourable  to  investors  (which  could  increase  the  risk  of  run  as  redemptions  would  be 
possible only over a short period of time), hence not maximizing the return for them due 
to  exogenous  factors.  In  addition,  stakeholders  cited  in  a  general  manner  that  it  would 
prove extremely difficult to allow for any form of redemption at the election of investors 
within a closed ended vehicle targeting illiquid investments (common arguments on the 
requirement to carry significant balances of liquid assets in order to manage the liquidity, 
cash  drag  on  performance,  illiquidity  concerns,  etc.).  To  mitigate  such  risks,  and  to 
ensure  proper  investor  protection  and  liquidity  management,  it  was  suggested  to  offer 
regular  redemption  possibilities  combined  with  specific  requirements  on  the  liquidity 
profile  of  the  vehicle  (i.e.  minimum  proportion  of  the  fund  invested  in  liquid  assets, 
liquidity  management  tools,  etc.)  or  to  retain  the  close-ended  nature  of  the  fund  with 
possibilities to disinvest thanks to the secondary market (this option was deemed viable 
by at least two respondents). 

Question  27.  Do  you  consider  it  appropriate  to  allow  for  regular  redemptions  or  an 
“evergreen” vehicle approach (no maturity)? Please specify what you mean by other in 
your response. How frequent should ELTIF redemptions be, and if so, which additional 
safeguards  would  you  consider  necessary  to  cater  for  the  illiquidity,  redemptions  and 
other fund cycle related aspects of the ELTIF framework? 

In  total  17  responses  to  this  question  were  provided;  with  the  majority  of  respondents 
being  or  representing  asset  management  associations.  The  majority  of  respondents 
expressed  the  view  that  there  is  a  high  appetite  for  “evergreen”  ELTIF  structures,  and 
that  structures  are  deemed  very  attractive  by  managers.  Given  the  high  cost  and 
administrative  burden  to  create  ELTIFs,  sponsors  would  welcome  the  possibility  to 
structure ELTIFs as an evergreen vehicle with regular redemption windows. That, in the 
view  of  the  majority  of  respondents  would  allow  investors  to  benefit  from  a  long-term 
alternative vehicle with adequate exit possibilities, without increasing the costs by having 
to wind-up and re-launch a new ELTIF after the end of life. Some respondents explicitly 
noted  that  the  fixed  maturity  of  the  ELTIF  structure  has  made  it  of  limited  appeal, 
especially where the product is intended to also target retail investors. The latter, in the 
view  of  such  stakeholders,  seem  to  be  more  familiar  with  an  unlimited  (“evergreen”) 
structure, which typically allows for more frequent redemption periods.  

Another group of stakeholders have expressed that in terms of redemption frequency for 
the open-end ELTIF structures, this should depend on the nature of the underlying assets 
and on the investor type. In other words, stakeholders have supported periodic or regular 
redemptions  (in conjunction  with  rather than a substitute of evergreen structures).  As a 
minimum,  such  stakeholders  seemed  to  consider  appropriate  a  monthly  redemption 

74 

 
 
 
 
 
frequency for the more liquid structures, allowing other less-liquid funds to adopt longer 
redemptions terms (i.e. quarterly, bi-annually or even annually). The common theme was 
that  it  would  be  up  to  the  investment  manager  to  dispose  of  adequate  liquidity 
management mechanisms.  

Very few respondents  have commented on the disadvantages or potential drawbacks of 
the  “evergreen”  (or  regular/periodic  redemptions)  approach.  Only  a  minority  of 
stakeholders  observed  specific  risks  to  evergreen  structures.  One  respondent  has 
proposed  to  address  such  risks  by  introducing  several  safeguards  and  requirements  in 
terms of the frequency of redemptions, setting up robust liquidity management tools and 
conducting  challenging  stress  tests  on  a  regular  basis,  requirement  to  hold  a  minimum 
amount of liquid assets (including shares of listed companies) to meet redemptions (for 
instance  30  %  of  the  net  asset  of  the  fund  but  possibly  smaller  depending  on 
commitments made by institutional investor sponsors) or setting this mandatory liquidity 
pocket  may  require  to  reduce  the  investment  quota  in  non-liquid  assets  in  parallel  (for 
instance  from  70  %  to  50  %);  requirement  of  an  initial  lock-up  period  and  minimum 
notice  periods.  In  addition,  another  stakeholder  noted  that  ELTIF  “evergreen” 
redemptions  should  be  managed  by  putting  in  place  gates,  at  the  discretion  of  the 
management company but depending on the assets/liabilities. 

Question  28.  Is  it  appropriate  to  provide  for  any  alternative  regulatory  approach  with 
respect  to  the  redemption  rules  or  portfolio  composition,  diversification  rules,  etc.  for 
ELTIFs  during  the  ramp-up  period  in  the  ELTIFs’  life-cycle?  Please  explain  your 
position and provide for advantages and disadvantages of your policy choice. 

the  ramp-up  period  when 

Less than a half of stakeholders provided input to this question. Out of the those market 
participants who provided responses the majority of responses (over 60%) confirmed that 
it  would  indeed  be  appropriate  to  provide  for  alternative  regulatory  approaches  to  the 
areas  set  out  in  the  question;  however  very  few  respondents  actually  provided  detailed 
and  well-justified  feedback  on  the  way  of  how  such  alternative  regulatory  approaches 
should  be  changed.  There  was  a  certain  degree  of  homogeneity  among  the  areas 
addressed  with  the  primary  focus  on  the  rules  during  the  ELTIF  ramp-up  period.  The 
majority  of  stakeholders  called  for  modifying  the  rules  for  the  ramp-up  period  (as  the 
crucial period for ELTIFs) so as to facilitate the establishment of an ELTIF with respect 
to the requirements for portfolio composition as well as for diversification (loans granted 
to a single borrower cannot exceed 10% of the net capital of the ELTIF that is available 
for  investment).  Such  stakeholders  opined  that  during  the  ramp-up  period,  especially 
during 
investments  are  made,  diversification 
requirements  constitute  tangible  challenges  for  ELTIF  AIFMs.  In  this  regard,  such 
stakeholders called for more clarity with regard to investor disclosure requirements and 
answers  to  the  question  how  to  apply  the  composition  and  diversification  requirements 
during the (initial) ramp-up period. The stakeholders called for the nuancing of Article 17 
of  the  ELTIF  Regulation  with  a  view  to  ensure  that  the  investment  limit  (70  %  quota) 
only  apply  after  the  end  of  the  ramp-up  period  of  the  fund  and  introducing  a  similar 
provision  regarding  diversification  rules.  In  terms  of  the  proposed  amendments,  the 
stakeholders  seemed  to  advocate  for  an  extension  of  the  Article  13(1)  carve-out 
provisions  relating  to  the  ramp-up  period  also  to  Articles  13(2)  and  15  of  the  ELTIF 
Regulation.  In  the  opinion  of  such  stakeholders,  sufficient  time  is  needed  for  careful 
investment  decisions,  taking  into  account  the  time  needed  to  complete  transactions, 
particularly  regarding  illiquid  assets.  For  these  reasons,  diversification  rules  are  very 
difficult  to  apply  during  the  ramp-up  period.  This  flexibility  would  be  granted  without 

initial 

75 

 
 
 
 
distinction between ELTIFs marketed to retail investors and professional ELTIFs. To that 
end,  one  stakeholder  provided  an  example  of  a  private  equity  transaction  whereby  the 
manager  of  the  ELTIF,  which  after  having  identified  the  potential  issuers,  would  face 
difficulties  in  carrying  out  the  legal  and  financial  due  diligence  due  to  the  inability  to 
accurately assess the valuation of the target.  

At least  three respondents  noted  that during the ramp-up period by definition  ELTIF is 
not  supposed  to  redeem  investors.  The  manager  should  be  permitted  to  dis-apply 
diversification and concentration limits during ramp-up, and create lock-in periods where 
no liquidity is offered. This would, in the opinion of such stakeholders, allow for more 
considered and effective portfolio construction. Some stakeholder noted that, in terms of 
the  regulatory  changes,  they  would  not  support  any  prescriptive  approach  the  ramp-up 
phase. 

Question 29. Are the provisions of the ELTIF Regulation pertaining to the admission to 
the secondary market and the publication of “periodical reports” clear and appropriate? 

Only  10  respondents  provided  feedback  to  this  question  with  the  majority  opining  that 
the provisions referred to in  the question are adequate  and clear,  and that  there  was no 
need  to  propose  any  enhancement  to  these  provisions.  A  possible  explanation  for  this 
position,  which  appears  to  be  coherent  in  the  context  of  the  ELTIF  rules,  is  that  an 
exchange-listed  ELTIF  would  need  to  comply  with  the  reporting  requirements  of  the 
relevant  listing  authority,  as  a  result  of  which  the  ELTIF  Regulation  would  need  to 
continue  to  be  non-prescriptive  in  this  respect.  This  feedback  is  consistent  with  the 
evaluation given to this question by other stakeholders whereby there has been no public 
listing of shares of ELTIFs partially due to listing requirements and structural valuation 
haircuts, partially due to costs and compliance burdens. 

A minority of stakeholders opined that the respective provisions of the ELTIF Regulation 
are  not  clear  and  appropriate  but  provided  no  detailed  explanations  for  their  position. 
Such stakeholders seemed to advocate for the easing of the admission to the secondary 
market  for  ELTIFs  to  make  them  more  appealing  for  investors;  periods  for  an  early 
redemption  could,  in  the  view  of  one  stakeholder,  be  set  specifying  the  progressive 
cancellation fees eventually applied (view echoed by another respondent who suggested 
to clarify what is considered to constitute a “material change” in the value of an asset to 
be disclosed in the periodic report).  

Question 30. Are the limitations of the ELTIF Regulation regarding the issuance of the 
new  units  or  shares  at  a  price  below  their  net  asset  value  without  a  prior  offering  of 
those units or shares at that price to existing investors clear and appropriate? 

A  small  number  of  respondents  (around  10%)  provided  feedback  with  the  remaining 
leaving  no  feedback  or  indicating  that  they  had  no  experience  with  the  issuance  of  the 
new  units  or  shares  by  ELTIFs.  A  few  responding  stakeholders  opined  (predominant 
view)  that  the  ELTIF  provisions  in  this  area  are  sufficiently  clear  and  adequate.  There 
was no justification or illustration for the views expressed by such stakeholders. 

Question  31.  Should  the  provisions  in  the  ELTIF  framework  related  to  the  issuance  of 
new units or shares be amended, and if so how? 

76 

 
 
 
 
 
 
 
 
 
Only a minority (around 10%) of the respondents provided feedback to this question. The 
remaining majority either provided no input or marked that they have no opinion on the 
question raised. Of those respondents  who replied  the views  were (almost  evenly) split 
between  those  who  opined  that  there  is  no  particular  need  to  modify  shares  or  units 
issuance  provisions  and  those  respondents  who  advocated  amendments  of  such 
provisions. Additional  nuanced views were presented on the need  for  a  clarification on 
the  preferential  subscription  right,  which  is  arguably  not  adapted  to  AIFs,  and  that  all 
ELTIFs  must  be  unitised.  Other  amendment  suggestions  the  clarification  that  ELTIFs 
should be capable of not only issuing shares or units but also bonds and that the ELTIFs 
regime  should  lay  down  specific  provisions  relating  to  the  pre-emptive  rights  for 
previous ELTIFs’ underwriters. 

9.   Marketing strategy for ELTIFs and distribution related aspects 

Question 32. What are the key limitations stemming from the ELTIF framework that you 
consider  reduce  the  attractiveness  of  the  ELTIF  fund  structure  or  the  cross-border 
marketing and distribution of ELTIFs across the Union? Please explain. 

Less than a fifth of all respondents have provided feedback to this question. There were 
certain commonalities in the responses. The key limitations brought up in the responses 
included investment ratios and limits to eligible assets (seen as barriers to retail investors; 
suitability  assessments  requirements  and  ongoing  monitoring  of  investor  eligibility 
(substantial  limitations  for  marketing  ELTIFs);  satisfying  multiple  cross-jurisdictional 
marketing registration and notification procedures (substantially increases time to market 
and  ramps  up  costs  for  investors  and  burden  on  the  fund  sponsor).  To  tackle  such 
limitations, one stakeholder has explicitly invited the Commission to consider surveying, 
or  alternatively 
for 
the  varying  NCA  practices 
operationalising the above provisions ahead of its amendment proposal. 

through  ESMA, 

responsible 

Question  33.  Do  you  consider  that  review  of  the  ELTIF  rules  related  to  the  equal 
treatment of investors is warranted? 

There responses to this question were not conclusive; the response rate was very low and 
there was an approximate even split between negative and no-opinion answers, and a few 
affirmative  answers.  Those  respondents  who  opined  (slightly  more  predominant  view) 
that no changes to  the equal  treatment  of investors provisions was warranted expressed 
the  view  that  the  existing  allocation  policies  and  conflict  of  interest  frameworks  which 
ensure fair treatment of investors met all needs related to equal treatment of investor; and 
as a result, no further changes were necessary. A more nuanced view in support of this 
position was that ELTIF managers are already subject to the full range of AIFMD rules 
in  relation  to  treating investors fairly, and these  are subject  to  investor and supervisory 
oversight. Nevertheless, some nuanced positions were presented, which targeted different 
aspects  of  the  ELTIFs  operation.  Notably,  it  was  argued  that  the  notion  of  equal 
treatment  should  be  clarified  in  a  context  where  investors  –  especially  in  an  amended 
ELTIF  “evergreen”  structure  –  may  not  all  be  “equal”,  i.e.  in  terms  of  financial 
education, investment knowledge and capacity, risk tolerance, investment horizons, etc. 
That  stakeholder  was  of  the  view  that  it  is  within  each  share  class  where  the  equal 
treatment of investors deserved to be warranted. Another stakeholder noted that the rules 
for  equal  treatment  should  not  be  read  to  prohibit  existing  market  standards  and  in 
particular  share  class  features  that  permit  differing  cost  structures  e.g.  for  retail  and 
professional investors or for high volume or early bird investors. That stakeholder argued 

77 

 
 
 
 
 
 
that Article 30(4) ELTIF Regulation in respect of „equal treatment of investors“ should 
be  clarified  to  make  clear  that  this  does  not  prevent  share  classes  with  differing  cost 
structures  in  these  quite  usual  scenarios.  This  view  was  echoed  by  another  respondent 
that  has  explicitly  referred  to  Article  23  provisions  which  are  currently  required  to  be 
applied both to retail and non-retail investors, and that should be allowed to be skipped if 
professional investors ask for opting them out  - while obviously being kept in all cases 
for retail investors.  

Question  34.  Is  it  necessary  to  clarify  the  ELTIF  framework  with  regard  to  the 
application of the principle of equal treatment of investors at the level of individual share 
classes, and any other specific arrangements for individual investors/group of investors. 

Question 34 is intimately linked to the previous question and is specifically targeting the 
application  of  the  “equal  treatment”  of  investors  and  the  categories  of  investors  (share 
classes,  legal  categorisation,  etc.).  Like  in  the  case  of  a  prior  question  33,  very  few 
respondents  have  provided  their  feedback.  The  equal  treatment  principle  was  generally 
upheld. Equal treatment of similarly situated investors was deemed important for investor 
confidence.  With  reference  to  the  prior  question,  it  was  noted,  however,  that  in 
institutional funds, it is not unusual for cornerstone investors to receive preference in fees 
or other terms in side letters that must be disclosed under AIFMD. One stakeholder went 
on  to  describe  a  multitude  of  ways  in  which  ELTIF  structures  could  offer  investors  a 
variety of different share classes, and each share class within a compartment could have 
different features such as the fee structure, a minimum subscription or holding amounts, 
currency, different hedging techniques or distribution policy or other distinctive features, 
or  be  offered  or  reserved  to  different  types  of  investors.  Investors  would  be  able  to 
choose the share class with the features most suitable to their individual circumstances; 
and such situations, where appropriately disclosed, would in the view of the respondents 
not fall short of the “equal” treatment purported by the ELTIF Regulation. In general, the 
prevailing view was that ELTIF funds should continue to be allowed to issue categories 
of  shares  with  different  rules  regarding  entrance  and  exit  fees,  and  gates  (and  other 
conditions) applied to different classes/categories of investors. 

10.   Miscellaneous areas 

Question  35.  Is  the  effectiveness  of  the  ELTIF  framework  impaired  by  national 
legislation or existing market practices? Please provide any examples you may have of 
“goldplating” or wrong application of the EU acquis.  

Despite  the  fact  that  the  existence  of  national  “gold-plating”  practices  and  other  issues 
preventing the cross-border marketing of ELTIFs was raised as an important issue, this 
question regrettably yielded no specific examples of the incorrect application of the EU 
acquis.  Some  of  the  responses  to  this  question  35  could  be  partially  relevant  in  the 
context of the responses to question 36 below. 

Question 36. Are you aware of any national practices or local facility requirements for 
ELTIF  managers  or  distributors  of  ELTIFs  that  require  a  local  presence  or  otherwise 
prevent  the  marketing  of  ELTIFs  on  a  cross-border  basis?  Please  explain  and  provide 
specific examples. 

Despite  the  fact  that  the  existence  of  national  practices  and  other  issues  preventing  the 
cross-border  marketing  of  ELTIFs  was  raised  as  an  important  issue,  this  question 

78 

 
 
 
 
 
 
 
 
regrettably  yielded  no  specific  examples  of  national  practices  or  local  facility 
requirements. The majority of respondents were not aware of any such national practices 
or local facility requirements as raised in the question. One respondent clarified, albeit in 
a general manner, that policy action desirable here to remove the requirement for ELTIF 
managers to set up local facilities in each Member State where it intends to market the 
ELTIF.  In  the  view  of  that  respondent,  the  requirement  has  also  been  interpreted  and 
applied  in  different  ways  as  between  Member  States,  increasing  the  operational  and 
compliance  burden  on  the  ELTIF  manager.  This  onerous  requirement  for  certain  local 
investor  facilities  has  recently  been  removed  for  UCITS  funds.  Removing  this 
requirement  in  the  ELTIF  regulation  would,  in  the  view  of  that  respondent,  therefore 
bring the regime in line with broader policy towards retail funds in Europe. Three other 
respondents  echoed  this  contribution  and  lamented  the  existence  of  local  facility 
requirements given the adoption and the implementation of the cross-border distribution 
of investment funds package, and has, to that end, proposed to explicitly clarifying this in 
the context of this review and level 2/3 measures. One respondent has further provided an 
example of the distribution-related problem, where Members who have launched ELTIFs 
have  noticed  some  confusion  regarding  the  distribution  of  roles  between  home/host 
regulators  and  experienced  additional  local  rules  regarding  marketing  material  which 
causes  to  considerably  slow  down  the  marketing  of  ELTIFs  to  retail  investors.  In  the 
opinion  of  that  stakeholder,  it  should  be  desirable  therefore  to  go  one  step  further  and 
consider (given the detailed operational and marketing rules which apply to ELTIFs and 
it  pan-European  nature)  whether  a  single  home  Member  State  filing  and  authorisation 
should validate the right to market ELTIFs across the EU. This European passport could 
be  underpinned  by  a  pan-European  marketing  regime  for  ELTIFs  to  address  divergent 
Member State approaches (e.g. financial promotions, advertisements, investor letters).  

Question 37. Which features of the current ELTIF framework, if any, should be defined 
in more detail and which should be left to contractual arrangements? Please explain. 

This question has attracted very few responses. However, those few responses that were 
provided,  shed  some  interesting  insights  and  exhibited  a  lot  of  commonalities.  Overall, 
respondents seemed to recommend that, where possible, the characteristics of the ELTIF 
should  be  set  out  in  contractual  agreements  between  investors  and  ELTIF  managers, 
unless there is a demonstrable need to prescribe them under the ELTIF policy. This view 
was  echoed  in  different  formulations  in  the  overall  submissions  starting  point  that 
features  of  the  ELTIF  should  be  determined  in  contractual  arrangements  between 
investors  and  ELTIF  managers  unless  there  is  a  demonstrable  need  for  these  to  be 
prescribed  in  the  ELTIF  policy  framework.  Interestingly,  this  contractual  freedom 
arrangement  principle  should  be  reinforced  where  an  ELTIF  is  solely  marketed  to 
institutional  investors  only.  Two  stakeholders  (an  NCA  and  a  large  European  industry 
association) supported the clarification of the conditions prescribed under Article 18.2, in 
particular,  paragraph  b)  in  relation  to  the  management  of  liquidity  risk.  Another 
stakeholder,  also  referred  to  diversification  requirements  (in  addition  to  redemption 
policy for ELTIFs) that only admit institutional investors should be abolished; such rules 
should in the view of such a stakeholder left to contractual arrangements. 

Question 38. Which specific provisions in the ELTIF framework could be amended, and 
how, in order to lower costs and reduce compliance, administrative or other burdens in a 
manner  that  would  not  lead  to  an  increase  in  material  risks  from  the  perspective  of 
effective supervision or investor protection? 

79 

 
 
 
 
 
in 

This question has not attracted many targeted responses. The majority of responses were 
generic,  or  expressed  no  opinion,  and  avoided  the  purpose  of  the  question  to  identify 
“specific  provisions 
the  ELTIF  framework”  and  reduction  of  “compliance, 
administrative  and  other  burdens”.  In  addition,  no  response  provided  any  quantitative 
illustration  or  substantiation,  in  one-off  costs  or  ongoing  costs,  of  such  compliance, 
administrative  or  other  types  of  burdens  incurred  by  ELTIFs  or  their  managers  in 
connection  with  operational  requirements.  The  most  notable  responses  included 
references to Article 26 of the ELTIF Regulation (local facilities for retail investors that 
should instead be provided via digital channels); Article 23 of the ELTIF Regulation (on 
the subject of transparency to eliminate the reference to the information of the Prospectus 
Regulation);  and  the  additional  and  specific  information  on  the  ELTIF  contained  in 
Article 23 of the ELTIF Regulation for the hypothesis of marketing the product to non-
professional  investors.  In  addition,  one  stakeholder  claimed  that  one  of  the  most 
important  current  obstacles  to  the  development  of  ELTIFs,  and  of  an  eco-system 
supporting  ELTIF  creation  and  marketing  across  all  member  states,  is  the  current 
requirement that an ELTIF appoint a depositary in the home member state of the ELTIF. 
That stakeholder has argued that given the specific characteristics of ELTIFs, and of the 
assets  held  within  ELTIFs,  providing  depositary  services  for  ELTIFs  is  complex  and 
challenging. As outlined above, there was no quantitative enumeration or justification of 
such costs and burdens, and their respective reductions. 

Question 39. Please elaborate on whether and to what extent the current ELTIF regime 
is appropriate for the AIFMs falling under Article 3(2) of Directive 2011/61/EU to have 
an incentive to market ELTIFs. 

This  question  was  included  into  the  questionnaire  of  the  open  public  consultation  in 
connection with the fact that the Commission, in its assessment of the ELTIF framework, 
must report to the co-legislators whether and to what extent the current ELTIF regime is 
appropriate for the AIFMs falling under Article 3(2) of Directive 2011/61/EU to have an 
incentive  to  market  ELTIFs.  Only  individual  responses  were  provided  and  most 
respondents  seemed  to  either  have  no  strong  opinion  or  not  directly  concerned  by  the 
rules.  A  handful  of  stakeholders  opined  that  the  ELTIF  regime  is  unlikely  to  be 
appropriate  for  sub-threshold  AIFMs  as  this  would  require  them  to  comply  with  full 
AIFMD  requirements.  Some  of  the  justifications  to  support  that  view  was  that  the 
AIFMD requirements could be too onerous on these managers (e.g. reporting) who prefer 
to  rely  on  national  private  placement  regimes.  Individual  respondents  went  further  to 
invoke investor protection rationale. Such stakeholders opined that it would be essential 
to restrain the ability to market ELTIFs on a cross-border basis to AIFs managers that are 
subject to the whole provisions of the AIFMD or choose to opt-in into this regime. They 
referred  to  the  fact  that  EU  rules  on  AIFMD  below  the  Article  3(2)  thresholds  are  not 
harmonised, which means that enhancing the passportability of AIFs or ELTIFs managed 
by  AIFM  below  these  thresholds  would  pose  significant  problems  in  terms  of  level 
playing  field  and  pave  the  way  for  regulatory  arbitrage.  In  the  opinion  of  such 
stakeholders, facilitating the marketing of ELTIFs by AIFMs falling under Article 3(2) of 
the AIFMD should not at all be the priority. Other responses invoked costs and burdens 
for sub-threshold AIFMs. At least two stakeholders have, in this context, referred to the 
EuVECA  regime.  Notably,  such  stakeholders  expressed  the  view  that  the  EuVECA 
regime  (which  does  not  require  full  AIFMD  compliance)  was  an  appropriate  (a  more 
appropriate) vehicle for VC and growth managers that fall under the AIFMD threshold. 
Overall, and despite the small number of respondents, the prevailing feedback suggested 

80 

 
 
 
that given their complexity and operational requirements, protection of investors, etc. it 
was not considered appropriate for sub-threshold AIFMs to manage ELTIF products. 

Question  40.  Please  provide  examples  of  any  national  taxation  regimes  towards  long-
term investment funds that are either discriminatory or that you deem materially reduce 
the  relative  attractiveness  of  the  ELTIF  framework  vis-  à-vis  other  (national)  fund 
vehicles,  also  taking  into  account  the  interaction  with  foreign  tax  systems?  Please 
provide specific examples of such cases. 

There  was  a  wide  degree  of  heterogeneity  in  the  format,  length  and  focus  of  the 
responses. Whilst only around a half of respondents provided feedback in response to this 
question,  their  feedback  could  generally  be  summarised  as  emphasising  the  importance 
of  tax  certainty  and  a  favourable  tax  treatment  (including  in  the  context  of  inheritance 
tax)  for  ELTIFs.  Several  stakeholders’  contribution  shared  a  common  theme  that  tax 
incentives  (no  tax  on  profitability  generated  by  ELTIF  e.g.  dividends,  capital  gains, 
interest) across EU jurisdictions would be the best tool to boost their attractiveness. Some 
stakeholders  went  into  specific  disincentives  pertaining  to  the  lack  of  taxation-related 
benefits  and  explicitly  labelled  taxation  is  an  important  barrier  to  the  cross-border 
marketing  of  ELTIFs.  The  issues  range  from  a  lack  of  access  to  double  tax  treaties, 
difficulties with tax reporting and unjustified tax discrimination. Such stakeholders listed 
the following main tax barriers that were deemed to impede cross-border distribution are: 

• 
• 
• 

• 

• 

lack of or difficulties with access to double tax treaties; 
difficulties in obtaining the refund of withholding taxes (WHT) or relief at source; 
national  requirements  for  income  tax  reporting  (reporting  requirements  differ 
widely  among  Member  States,  resulting  in  additional  complexity  and  costs  for 
funds distributed on a cross-border basis); 
tax  discrimination  against  non-resident  investment  funds:  local  tax  rules  make  it 
much  easier  for  investors  to  buy  domestic  funds  rather  than  foreign  funds.  For 
example,  in  some  countries,  local  income  tax  on  distributions  or  redemptions  is 
collected  at  source,  by  imposing  a  final  withholding  tax  on  any  distributions, 
reportable income or capital gains; 
lack of harmonization of the fiscal  rules for all relevant players in the investment 
fund market (regulatory fragmentation was cited as having the capacity to prevent 
investors from gaining exposure to long-term assets, thus preventing the increased 
pooling  of  capital  and  investment  expertise  that  creates  economies  of  scale  for 
long-term investment funds). 

In this context, only a few stakeholders have recognised, whilst noting that taxation is the 
critical point to make ELTIF a success for retail investors, that the European Commission 
in  fact  lacks  the  legal  mandate  to  legislate  in  this  area.  One  stakeholder  explicitly 
acknowledged “that the EU does not have legislative powers regarding direct taxation to 
force EU jurisdictions to adapt their tax system to impose direct taxes in a particular way 
to  this  or  to  any  other  investment  vehicle,  as  such  legislative  adaptation  depends, 
ultimately,  on  the  decision  of  the  Member  States  involved”.  However,  that  stakeholder 
noted  that  an  efficient  approach  to  try  to  prevent  issues  like  the  above  would  be  to 
promote by means of a Recommendation the legislative adaptation of the Member States’ 
tax system for eliminating uncertainty about the tax regime applicable to ELTIFs. 

The Union in general was criticised by some stakeholders for being unable to set a Single 
Market  taxation  regime  which  would  ensure  an  equal  treatment  between  domestic  and 

81 

 
 
 
 
 
 
cross-border investments. This failure was one of the factors preventing the formation of 
the  Single  Market  and  retail  investors  to  fully  benefit  from  pan-EU  funds  investing  in 
Single Market long-term investments.  

Some  stakeholders  made  specific  recommendations  that  could  provide  initial  solutions 
for  the  identified  taxation-related  issues,  such  creating  a  tax  model  for  funds  that  fulfil 
predefined  requirements,  to  secure  and  enhance  the  role  of  ELTIFs.  Such  framework 
would  entail  a  tax  upon  distributions  levied  in  the  state  of  residence  of  the  investment 
vehicle, albeit with no imposition of taxes on income or gains within the vehicle, and no 
withholding at source on income from the assets of the fund where the latter are located 
in an EU Member State. 

Finally,  very  few  respondents  actually  provided  real  examples  of  national  taxation 
regimes.  In  this  context,  references  were  made  to  the  Spanish  tax  framework  where 
ELTIFs  compete  with  Fondos  de  Inversión  Libre  (FIL),  a  kind  of  hedge  funds  (AIF) 
authorized under the Spanish CIS legislation. These institutions are subject to a reduced 
tax  scheme  (1%  of  yearly  profits  against  25%  that  have  to  pay  ELTIFs).  Likewise, 
Spanish  Private  Equity  entities  enjoy  a  deduction  of  99%  on  the  taxable  base.  Another 
national  law  example  was  a  reference  to  specific  German  taxation  rule  which  was 
arguably  hindering  the  eligibility  of  ELTIFs,  and  notably,  Section  26  of  the  German 
Investment Taxation Act (“Investmentgesetz”).  

Question  41.  You  are  invited  to  make  additional  comments  on  this  consultation  if  you 
consider  that  some  areas  have  not  been  adequately  covered.  Please  elaborate,  more 
specifically, which amendments of the ELTIF framework could be beneficial in providing 
additional clarity and practical guidance in facilitating the pursuit of the ELTIF strategy. 
Please  include  examples  and  evidence  on  any  issues,  including  those  not  explicitly 
covered by the questions raised in this public consultation: 

Only a few respondents took an opportunity to provide additional comments. In general, 
there  was  no  uniformity  or  common  pattern  in  the  nature  or  content  of  such  additional 
comments, which could partially be explained by the open-ended nature of the question. 
Some of the notable comments by stakeholders included the following:  

-  

-  
-  

- 

- 

Article  21  of  the  ELTIF  Regulation  regarding  disposal  of  ELTIF  assets  is  no 
longer relevant for evergreen funds, and should be amended accordingly; 
ELTIFs should be allowed to merge with other funds; 
The 1-year period for the winding down of an ELTIF if the redemption requests, 
made in accordance with the ELTIF's redemption policy, have not been satisfied, 
should be extended to 3 years before the winding down begins; 
Recommendation 
the  principles  regarding 
disclosures  on  sustainable  finance  and  those  provided  for  by  the  ELTIF 
Regulation. It was recommended to rely on definitions and criteria defined within 
the relevant  EU Regulations  (“Disclosure”  and “Taxonomy”) adopted as  part of 
the EU agenda on Sustainable Finance; 
It  was  observed  that  ELTIFs  could  be  the  tool  to  create  public-private 
partnerships on systemic issues, or on regulated/regulated assets, aligning public 
interest and adequate remuneration for the invested private capital, in a forward-
looking perspective; 

to  ensure  coherence  between 

82 

 
 
 
 
 
 
- 

One stakeholder emphasised the need that investors should be free to choose the 
investments  that  best  reflect  their  needs  (from  among  the  more  or  less  risky 
and/or regulated).  

11.   Consistency and representativeness of positions 

In assessing the validity of arguments and information provided by the respondents in the 
course  of  the  open  public  consultation,  substantial  attention  was  paid  to  the  overall 
consistency and the argumentation logic, as well as the qualification (and quantification) 
of  those  concerns  and  incentive  structures  invoked  by  the  respondents.  This  work  was 
carried out  in  connection with  certain  limitations stemming from  the fact  that technical 
questions of the long questionnaire (entire 42 questions) were answered only by several 
stakeholders  (far  less  than  the  overall  54  submissions).  This,  in  turn,  has  resulted  in  a 
situation  that  a  large  number  of  questions  were  responded  by  a  low  number  of 
respondents,  which  has  raised  certain  methodological  difficulties  in  analysing  with 
precision which groups of stakeholders (large vs small, business organisations vs public 
authorities,  real  estate  vs  private  equity  vs  insurance  sectors  etc.,  analysis  per 
jurisdictions)  have  expressed  which  positions.  In  many  cases,  it  was  difficult  or 
impossible to precisely determine which group, type, size or business sector category of 
stakeholders expressed strong preference in each specific policy question. 

One of the tools employed to that extent was to cross-compare the submissions provided 
during  the  open  public  consultation  with  those  submissions  and  feedback  statements 
shared with the Commission services throughout the policy work on the ELTIF review.  

In  particular,  the  Commission  services  have  compared  and  analysed  the  results  of  the 
open public consultation in the context of the ESMA Investment Management Standing 
Committee and NCAs’ consultation; Member States’ consultations during two meetings 
of the Expert Group of the European Securities Committee; the report of the HLF on the 
Capital  Markets  Union;  multiple  submissions  by  asset  management  associations  and 
respective  stakeholders,  and  several  multilateral  workshops  and  meetings  during  which 
the  Commission  services  had  a  chance  to  learn  about  the  positions  of  the  market 
participants. Such meetings  comprised the stakeholders’ colloquium on  European long-
term  investment  funds  (ELTIFs)  of  February  2020;  the  ELTIF  workshop  organised  by 
the French Asset Management Association of December; the ELTIF workshop organised 
by AIMA of February 2021and the ELTIF workshop organised by EuropeInvest with the 
representatives of the private equity industry of May 2021.  

Furthermore,  the  Commission  services  have  analysed  selected  submissions  by  the 
representatives  of  investors,  selected  academic  publications,  public  authorities  and 
private citizens.  

Based on these interactions and information sources, it has been generally concluded that 
the submissions of the open public consultation are highly representative and consistent 
with the views provided by industry stakeholders. 

83 

 
 
 
 
 
 
 
 
 
 
ANNEX 3: WHO IS AFFECTED BY THE INITIATIVE AND HOW 

1. PRACTICAL IMPLICATIONS OF THE INITIATIVE 

Fund  managers  would  be  expected  to  face  reduced  costs  in  both  setting  up  and 
registering funds,104 as well as marketing funds to investors. The easing of the fund rules 
for  the  professional  investors  and  reducing  the  barriers  for  retail  investors  would  also 
boost the attractiveness of the ELTIF regime which could, in turn, incentivise AIFMs to 
use ELTIFs as a go-to vehicle for structuring their long-term investments. It is generally 
expected that the initiative would be beneficial to all ELTIF managers.  

Investors are expected to largely benefit from this initiative. The easing of the fund rules 
for the professional investors and reducing the barriers to entry for retail investors would 
increase the range of products available, leading to increased competition in the market. 
Investors are thus expected to enjoy better to access longer term investments where these 
are aligned with their investment needs and could provide diversification benefits.  As a 
result, they may be more likely to choose to invest in ELTIFs compared to other types of 
investment,  and  make  greater  use  of  cross-border  funds.  However,  this  increased 
accessibility  to  ELTIFS  for  retail  investors  will  not  come  at  the  expense  of  the  current 
protections for retail investors in the Regulation.  

National  Competent  Authorities  may  face  a  mild  degree  of  additional  and  ongoing 
work in  implementing minor changes in  the constitution of the ELTIF register, such as 
receiving  regular  updates  on  the  status  of  authorised  ELTIFs.  However,  given  the  fact 
that  the  NCAs  are  already  familiar  with  the  regulatory  requirements  of  the  ELTIF 
register, minor changes to the requirements to the frequency and substance of the ELTIF 
register  should  not  bring  about  significant  costs  or  lead  to  new  administrative  burdens. 
Such costs and burdens may be deemed negligible. At the same time, the streamlining of 
the  authorisation  requirements,  as  per  the  technical  advice  of  ESMA  (see  Annex  7) 
would partially balance out the costs and burdens on the NCAs. 

ESMA  may  face  a  degree  of  additional  involvement  in  more  frequent  updates  of  the 
ELTIF  register,  such  as  processing  and  following  up  on  the  NCAs’  notifications 
regarding the status of authorised ELTIFs. It should be noted that as of Q3 2021 ESMA 
has not constituted a formal electronic register of ELTIFs and such register is currently 
maintained as an Excel file available at the website of ESMA. However, given the fact 
that  ESMA  is  already  familiar  with  the  regulatory  requirements  of  the  ELTIF  register, 
minor changes to the requirements to the frequency and substance of the ELTIF register 
should  not  bring  about  major  costs  or  substantially  increase  administrative  burdens  for 
ESMA. Any such burdens or costs will be negligible. 

SMEs  Although  the  proposed  policy  options  do  not  have  a  direct  impact  on  small  and 
medium enterprises (SMEs) more broadly, they will indirectly benefit from the initiative 
as increased cross-border distribution of investment funds would accelerate the growth of 
EU  investment  funds  and  allow  them  to  benefit  from  economies  of  scale.  This  in  turn, 

104  
Article  5(2)  of  the  ELTIF  Regulation  requires  that  the  competent  authority  of  the  ELTIF  shall  give  an 
approval  to  the  EU  authorised  AIFM  who  intends  to  manage  the  ELTIF.  The  extent  to  which  this  additional 
authorisation, that supplements the authorisation granted under the AIFMD, is needed and useful may be unclear and 
may create confusion as regards the responsibilities of the two different competent authorities involved. Therefore, and 
with the endorsement of ESMA, these requirements are considered to be removed. 

84 

 
 
 
 
 
 
 
                                                           
may  improve  the  availability  and  cost  of  financing  for  SMEs  offered  through  these 
investment funds. 

2.  

SUMMARY OF COSTS AND BENEFITS 

I. Overview of benefits (total for all provisions) – Preferred Option 

Description 

Amount 

Comments 

Direct benefits 

No estimate available. 

No estimate available. 

No estimate available. 

No estimate available. 

No estimate available. 

Removal  of  the  ad-hoc  suitability  test  foreseen  under 
ELTIF  as  it  duplicates  the  suitability  test  provided  for 
under  ELTIF  regulation.  Reduced  compliance  costs  for 
funds that target only professional investors. 

Improved access to funds  for retail investors  will allow 
ELTIFs  to  better  meet  their  investment  goals  and 
diversify their portfolios.  

Improvements  in  operational  efficiency  and  any  cost 
reductions  (thanks  to  such  adjustments  as  removal  of 
local  facilities  and  streamlining 
the  authorisation 
requirements)  may  translate into higher profitability  for 
asset managers. 

By  increasing  the  flexibility  of  the  fund  rules,  and 
therefore the  size  of ELTIFs, investment  managers  will 
be able to invest in a broader range of asset classes and 
pursue more investment strategies. 

By  allowing  investors  to  redeem  their  holdings  before 
the  funds  maturity,  the  product  may  be  more  attractive 
to new investors increasing the flow of funds to ELTIFs. 

Indirect benefits 

Reduction in 
compliance costs for 
fund managers 

Retail investors able to 
invest from smaller 
amounts 

Reduced fund 
registration/issuance 
costs for fund 
managers 

Increased flexibility in 
fund rules for fund 
managers 

Increased redemption 
opportunities for 
investors 

Increased availability 
of alternative sources 
of finance for SMEs 

No estimate available as this 
will be driven by market 
uptake and investment 
decisions on capital 
allocation. 

Fund returns for 
investors 

No estimate available 

Increased long-term 
investments in the real 
economy 

No estimate available – 
benefit cannot be quantified. 

SMEs  in  Europe  are  overly  reliant  on  traditional 
credit providers such as banks. However, they can 
face  increased  borrowing  costs  or  be  prevented 
entirely  from  accessing  these  funding  channels 
based on the level of perceived risk and the banks 
capital  requirements.  ELTIFs  can  provide  an 
alternative source of long term financing for SMEs. 

Improving  fund  returns  and  allowing  investors  to 
access  products  that  are  tailored  to  meet  their 
investment needs. 

The long term focus of ELTIFs makes them an effective 
vehicle for investors to invest in capital projects such as 
green  energy, 
infrastructure,  housing  and  medical 
facilities they  would otherwise not have  access to. This 
means  ELTIFs  can  mobilise  further  savings  for  long-
term projects. Increased use of the ELTIF vehicle could 
also  assist  in  diverting  funding  towards  long  term 
projects  supporting 
the  global 
pandemic. 

the  recovery  from 

(1) Estimates are relative to the baseline for the preferred option as a whole (i.e. the impact of individual 
actions/obligations of the preferred option are aggregated together); (2) Please indicate which stakeholder 
group  is  the  main  recipient  of  the  benefit  in  the  comment  section;(3)  For  reductions  in  regulatory  costs, 
please  describe  details  as  to  how  the  saving  arises  (e.g.  reductions  in  compliance  costs,  administrative 
costs, regulatory charges, enforcement costs, etc.; see section 6 of the attached guidance). 

85 

 
 
 
 
II. Overview of costs – Preferred option 

Investors  

Fund Managers 

Supervisors 

One-off 

Recurrent 

One-off 

Recurrent 

One-off 

Recurrent 

Direct 
costs 

No cost 
impact 

No cost impact  No cost 
impact 

No cost 
impact 

No cost impact  No cost 
impact 

Indirect 
costs 

No cost 
impact 

No cost impact  No cost 
impact 

No cost impact  No cost 
impact 

Increased 
size of 
funds may 
allow 
realisation 
of 
economies 
of scale cost 
savings 

Direct 
costs 

No cost 
impact 

No cost impact  No cost 
impact 

No cost 
impact 

No cost impact  No cost 
impact 

Indirect 
costs 

No cost 
impact 

No cost impact  No cost 
impact 

Reducing 
retail 
investor 
barriers to 
entry 

Increased 
flexibility in 
fund rules  

No cost impact  No cost 
impact 

No cost impact  No cost 
impact 

Increased 
size of 
funds may 
allow 
realisation 
of 
economies 
of scale cost 
savings 

May reduce 
reporting/co
mpliance 
costs for 
professional 
only funds 

Differentiate
d treatment 
of retail and 
professional 
investors 

Direct 
costs 

May 
reduce 
search 
costs for 
professio
nal 
investors  

No cost impact  May reduce 

marketing 
and 
placement 
costs for 
professional 
investor 
funds  

Indirect 
costs 

No cost 
impact 

No cost impact  No cost 
impact 

No cost 
impact 

No cost impact  No cost 
impact 

New 
redemption 
options 

No cost 
impact  

Direct 
costs 

Ability to 
redeem more 
frequently 
reduces 
opportunity 
cost for 
investors. 

May lead to 
additional 
administrati
on costs and 
increased 
drag on 
fund returns 
to maintain 
liquidity 
pocket 

May lead to 
additional 
administrati
on costs and 
increased 
drag on 
fund returns 
to maintain 
liquidity 
pocket 

No cost impact  No cost 
impact 

Indirect 
costs 

No cost 
impact 

No significant 
cost impact 

No cost 
impact 

No cost 
impact 

No cost impact  No cost 
impact 

(1)  Estimates  to  be  provided  with  respect  to  the  baseline;  (2)  costs  are  provided  for  each  identifiable 
action/obligation  of  the  preferred  option  otherwise  for  all  retained  options  when  no  preferred  option  is 
specified;  (3)  If  relevant  and  available,  please  present  information  on  costs  according  to  the  standard 
typology  of  costs  (compliance  costs,  regulatory  charges,  hassle  costs,  administrative  costs,  enforcement 
costs, indirect costs; see section 6 of the attached guidance). 

86 

 
 
 
The ELTIF is a specific product regulation and funds are constituted as AIFs domiciled 
in the EU and managed by an authorised AIFM under the AIFMD. The requirements and 
obligations  on  the  fund  managers  are  those  applicable  under  the  AIFMD  which  is  the 
main driver of compliance costs.  

The  AIFMD  is  currently  subject  to  review  and  potential  changes  to  its  requirements 
could have cost implications or introduce additional efficiencies for ELTIF managers but 
these cannot be estimated or precisely quantified at this time.  

2.1.  Cost quantification 

With  regard  to  the  ELTIF  itself,  the  proposed  policy  options  are  designed  to  remove 
some of the restrictions applied to retail investors and grant managers greater flexibility 
in  their  investment  choices  and  strategies.  Stakeholder  feedback  did  not  highlight  any 
issues related to the costs of compliance with the ELTIF framework. The proposals made 
will maintain current reporting obligations and necessary investor protections and while 
there may be some efficiencies, the proposal is considered cost neutral when compared to 
the baseline. Any costs are expected to be negligible. 

2.2.  Costs and costs reduction for the industry 

The proposed changes to the ELTIF should be cost neutral or deliver cost alleviation for 
fund  managers,  particularly  those  targeting  only  professional  investors  as  the  costs  as 
they will not have to perform additional suitability tests anymore. The removal of the ad-
hoc suitability test foreseen under ELTIF would be largely beneficial as it duplicates the 
suitability test set out in MiFID II. 

However,  the  addition  of  new  redemption  mechanisms  that  allow  investors  to  exit  the 
fund prior to its maturity may lead to a reduction in the fund’s performance as they may 
have to maintain a liquidity or cash pocket in order to meet redemption requests without 
having to sell assets out of the fund. Any increased administration costs related to more 
frequent redemptions would be only voluntary (i.e. at the discretion of the fund manager) 
and may be estimated as negligible. Any frictional costs are balanced against the ability 
of investors to  redeem  their holdings in  a shorter time period instead of having to  hold 
their  investment  until  the  funds  maturity,  which  is  expected  to  translate  into  greater 
demand for ELTIFs overall.  

2.3.  Costs and costs reduction for the national competent authorities 

The  proposed  changes  to  the  ELTIF  should  be  cost  neutral  for  the  relevant  competent 
authorities as no changes are proposed to the reporting requirements. 

2.4.  Costs and costs reduction for investors 

Professional investors: 

Reduced  search  costs,  more  flexible  fund  rules  will  allow  managers  to  tailor  funds  to 
meet  the  specific  needs  of  professional  investors  with  the  potential  to  realise  increased 
returns  from  targeted  investment  strategies  while  allowing  more  capital  finance  to  be 
directed towards longer term projects in the EU and support the pandemic recovery. More 
flexible  redemption  mechanisms  will  reduce  the  opportunity  costs  of  investing  in 

87 

 
 
 
 
 
 
 
 
 
 
 
 
ELTIFs,  reduce  the  risks  faced  by  investors  who  will  no  longer  have  to  hold  their  full 
investment until the fund’s maturity and allow more investors to use ELTIFs. 

Retail investors: 

Existing protections for retail investors will be maintained but their access to ELTIFs will 
be reduced. This will reduce their search costs and the hassle costs of accessing ELTIFs 
increasing  their  access  to  longer  term  investments  and  mobilise  their  capital  towards 
investments  in  the  real  economy  and  the  overall  pandemic  recovery.  More  flexible 
redemption mechanisms will reduce the opportunity costs of investing in ELTIFs, reduce 
the overall risks faced by investors who will no longer have to hold their full investment 
until the fund’s maturity and allow more investors to use ELTIFs. 

88 

 
 
 
 
 
 
 
 
ANNEX 4: METHODOLOGICAL APPROACH, ANALYTICAL 
METHODS AND LIMITATIONS 

1.  

Overview  

The  analysis  underlying  the  impact  assessment  is  based  on  three  methodological 
approaches: desk research, qualitative analysis and quantitative analysis.  

The data used stems from several different data sources. Input was collected from a wide 
range  of  stakeholders,  including  asset  managers,  ELTIFs,  industry  associations,  trade 
associations representing investors, academics and citizen, including through public open 
consultation  on  the  functioning  of  the  ELTIF  regime,  bilateral  consultations  with  the 
stakeholders,  policy  dialogues  with  the  NCAs  and  the  ESMA  (including  from  the 
technical advice to the Commission in January 2021 (ESMA34-46-99), as well as follow-
up survey and targeted interviews are used for the qualitative analysis.  

In  addition  data  from  market  databases  such  as  Morningstar  and  Refinitiv  were  used. 
Morningstar  data  was  used  for  the  quantitative  analysis.  Public  websites  of  ELTIF 
managers were used to study, where made available, the fund documentation, including 
the annual reports and the prospectuses of ELTIFs. 

A few academic publications on the functioning of the ELTIF framework were also used 
in so far as the quality of the publications was acceptable. 

2.  

Desk research  

A  literature  review  was  performed  regarding  the  determinants  of  cross  border  fund 
distribution  and  resulting  impact  on  competition  and  consumer  choice.  The  relevant 
(academic)  literature  was  also  consulted  to  gain  an  insight  into  fund  market 
developments.  

3. 

Qualitative analysis  

Qualitative  analysis  is  based  on  the  information  collected  via  the  stakeholder 
three-fold 
consultation.  The  Commission  services  have  followed 
methodological  approach  to  the  consultation  of  stakeholders:  (i)  public  stakeholder 
consultation;  and  (ii)  gathering  targeted  evidence  based  on  dedicated  follow-up 
interviews.  

the  following 

The public stakeholder consultation  was conducted prior to the impact assessment. The 
consultation  was  open  so  the  design  would  ensure  sufficient  representation  of  different 
stakeholders,  maximize  the  number  of  respondents,  and  allow  for  sufficient  spread  in 
opinion (in case opinions would differ). The public consultation thus provided insight on 
the  average  opinion  for  each  stakeholder  group  concerned  and  the  level  of  consensus 
within  each  stakeholder  group.  Details  on  the  public  consultation  can  be  retrieved  in 
Annex 2.  

The  follow-up  consultation  ensured  maximum  representativeness  for  a  given  level  of 
confidence. In addition, specific questions were introduced to obtain more information on 
topics for which the public consultation yielded no sufficient input. The result allowed to 
further  insight  into  the  differences  between  ELTIFs  that  are  marketed  exclusively  to 

89 

 
 
 
 
 
 
 
 
 
 
 
 
professional investors and ELTIFs that could be marketed to retail investors, as well as 
different  approaches  to  the  life-cycle  of  the  fund,  leverage,  redemptions  and  preferred 
options in modifying ELTIF fund rules. 

4.  

Quantitative analysis  

While qualitative analysis of the ELTIF market looked into a range of issues pertaining 
to  the  operation  of  the  ELTIF  regime  (see  Annex  5),  no  detailed  quantitative  analysis 
could  be  performed  in  order  to  examine  structural  factors  pertaining  to  the  functioning 
and uptake of the ELTIFs segment (see Section 5 on limitations). More specifically, the 
information provided by ESMA enabled a broad understanding of the size of the ELTIF 
market,  an  approximate  portfolio  composition  of  some  ELTIFs,  common  strategies 
employed,  jurisdictions  of  ELTIFs’  domicile  and  jurisdictions  where  ELTIFs  were 
marketed and average life duration. On the contrary, some other parameters, such as fees, 
performance  metrics,  as  well  as  other  characteristics  central  to  the  evaluation  of  the 
existing ELTIFs were not readily available. The results provide an indication regarding 
the  extent  to  which  regulatory  measures  that  would  increase  the  attractiveness  of  the 
ELTIFs. Due to some inherent limitations (see section 5 below – Limitations), including 
a  very  small  sample  size  of  ELTIFs,  the  quantitative  analysis  has  exhibited  certain 
characteristics  that  have  prevented  the  Commission  services  from  drawing  firm 
conclusions. 

5. 

Limitations  

a.  

Existing limitations  

All  reasonable  efforts  have  been  undertaken  to  collect  and  analyse  available  evidence. 
There  are  nevertheless  still  some  remaining  limitations  to  the  current  approach  which 
should be taken into consideration when interpreting the evidence.  

Public stakeholder consultation: the ELTIF public consultation has attracted 54 formal 
responses. More responses could have yielded more information regarding the extent that 
there was consensus among individual stakeholders on certain subject.  

Follow-up consultation directed at existing ELTIF managers: manual selection was set 
up to be representative of the registered ELTIF managers. In total, 54 formal responses 
were  received  via  the  Commission’s  Better  Regulation  portal.  Several  responses  to  the 
open  public  consultation  were  provided  outside  the  formal  submission  channels  and 
some submissions were made after the deadline. 

Limitations  of  regulatory  data:  Ideally,  the  Commission  services  would  have  liked  to 
analyse a wide range of data pertaining to the registered ELTIFs, including their granular 
portfolio  breakdowns,  performance,  total  effect  of  costs  (regulatory  fees,  compliance 
costs,  search  and  administrative  costs),  fees  and  charges,  as  well  as  other  information 
related to the operation of ELTIFs. Due to the fact that a large portion of this information 
is  only  available  to  the  NCAs  supervising  the  ELTIF  manager,  there  has  been  certain 
reluctance  to  request  the  ELTIF  managers  to  disclose  this  information  in  its  entirety 
citing  confidentiality  and  business  secrecy  concerns  (even  if  anonymised  the  small 
population size would make it easy to know the identity of an ELTIF), as well as the fact 
that such a request for non-mandatory data would expose the ELTIFs and their managers 
to unwanted and undue administrative burden. 

90 

 
 
 
 
 
 
 
 
 
Fund  databases  (Morningstar)  and  other  data  sources:  None  of  the  available 
commercial databases or data sources has complete coverage. As a result, the information 
on the existing ELTIFs had to primarily be served by ESMA, coordinating the individual 
submissions by the NCAs. As a case in point, the reporting on Morningstar database is 
based  on  a  voluntary  reporting  from  asset  managers.  Morningstar  has  no  self-standing 
classification of ELTIFs, and all the ELTIFs known to the Commission services had to 
be tracked and analysed separately. 

Morningstar data for AIFs is far less representative, and no independent classification of 
ELTIF exists. Hence, AIFs and ELTIFs data from Morningstar an only  be perceived as 
indicative and should be interpreted with  caution. As data provision is not compulsory, 
there are also some discrepancies between the data reported by various data sources.  

Granular  cost  data  and  itemisation:  As  indicated  above,  detailed  information  on  all 
costs influencing the  operation of ELTIFs  (including  regulatory  fees, compliance costs, 
search costs, operational costs, marketing costs, etc.) is not available at a granular level. 
Regulatory fees are available at this level of detail, but they only constitute a small part 
of total costs. 

Quantitative assessment on baseline scenario and effect of policy action 

Due to  a very small and highly idiosyncratic sample of the ELTIFs population  (among 
others, in terms of fund sizes, strategies employed and jurisdictional domicile), it is very 
unlikely to come up with an accurate quantitative assessment of a baseline scenario, and 
any possible effects of selected policy actions. 

Qualitative forecast on baseline scenario and effect of policy action 

Historical data on the operation of ELTIFs and the main drivers therefor are limited due 
to a relatively short time of the operation of the ELTIF Regulation, as well as due to the 
fact  that  a  large  portion  of  ELTIF  registrations  is  still  very  recent.  As  a  result,  the 
expected growth rate based on a multi-optional forecast cannot be estimated with desired 
accuracy. 

A fund manager's decision to design and establish an ELTIF and to market it to a set of 
investors  –  possibly  on  a  cross-border  basis  –  will  be  influenced  by  discretionary 
strategic  considerations  on  the  one  hand,  idiosyncratic  nature  of  the  target  assets, 
maturity profile sought after, the attractiveness of the local market, competition, taxation 
considerations,  market  conditions,  and  many  other  factors.  The  latter  include  structural 
factors of the local market, expected demand, expected profitability and scalability, etc.  

In addition, a number of important out-of-scope drivers (e.g. taxation) were identified as 
summarised by the problem tree. As a result, it is not feasibility to have point estimates 
on cost reduction induced by option policies in view of the lack of both a representative 
stakeholders’ sample size and the historical data on these drivers that shape the decision 
process of setting up and managing an ELTIF.  

91 

 
 
 
 
 
 
 
 
 
 
 
b.  

Interpretation of results and strategy to mitigate effect of limitations  

Public stakeholder consultation:  

It  is  important  to  note  that  in  spite  of  the  relatively  small  number  of  responses,  the 
coverage  for  the  fund  management  industry  is  good  nonetheless:  a  large  portion  of  the 
European  and  national  asset  managers  associations  and  industry  trade  associations 
representing investment managers, financial products manufacturers, as well as investors’ 
representatives  have  contributed  to  the  consultation  by  providing  detailed  submissions. 
Given that the majority of funds are members of a fund association, the responses from 
national  and  European  associations  represent  a  significant  part  of  the  asset  manager 
sector.  Certain  stakeholders’  representatives,  in  turn,  represent  national  member 
associations,  which  ensures  a  broader  EU-wide  representation  even  given  the  situation 
where  certain  Member  States  have  no  national  domiciled  ELTIFs.  For  example, 
EFAMA,  the  association  representing  the  European  investment  management  industry, 
represents 28 member associations, 57 corporate members and 23 associate members (at 
end  Q4  2020)  with  total  net  assets  of  European  investment  funds  reaching  EUR  18.8 
trillion. 

To overcome concerns about limited differentiation of opinion within stakeholder groups, 
the stratified randomized sampling-based survey was set up where groups were selected 
to allow for maximum differentiation between large and small funds and active and non-
active  funds  (cross-border  distribution),  while  remaining  representative  for 
the 
population.  In  addition,  new  questions  were  introduced  to  address  limited  responses  to 
specific issues.  

Further differentiation of stakeholder opinions was established by:  

 

 

 

 

Formally consulting ESMA in order to get the advice of the ESMA and the NCAs’ 
experts  on  the  policy  options  considered  and  their  recommendations  for  the 
improvement of the ELTIF regime;  
Inviting an investor association (Better Finance) to  submit its observations on the 
functioning of the ELTIF regime to ensure that the retail investor's protection is not 
diminished;  
Organising  several  ad-hoc  conference  calls  and  meeting  with  asset  managers 
associations  and  asset  management  companies  in  order  to  evaluate  the  impact  of 
the  options  considered  (such  as  the  ELTIF  colloquium  held  in  Luxembourg  on  4 
February  2020;  the  ELTIF-dedicated  webinar  organised  by  the  French  Asset 
Management  Association  with  the  representatives  of  the  French  and  European 
investment management community), etc.; 
Liaising  with  a  wide  range  of  distinct  industry  representatives  (such  as  insurance 
industry  associations,  stock  exchanges,  actuarial  professionals,  academics,  legal 
practitioners, citizens and others) to obtain a wide spectre of views on the subject-
matter. 

As a result of this approach, the variation in responses in the industry stakeholder group 
is  increased,  while  the  extra  questions  completed  the  picture  on  the  limitations  of  the 
functioning of the ELTIF framework. 

92 

 
 
 
 
 
 
 
 
Fund databases (Morningstar) and other data sources: funds are not obliged to report 
data.  As  a  result  none  of  these  databases  or  data  sources  has  complete  coverage.  As  a 
case  in  point,  the  reporting  on  Morningstar  database  is  based  on  a  voluntary  reporting 
from asset managers.  

The  number  of  UCITS  funds  included  in  the  Morningstar  database  is  estimated  to  be 
about 80% of the number of UCITS reported by EFAMA. Morningstar data for AIFs is 
far less representative. Hence, AIF data from Morningstar is only indicative and should 
be  interpreted  with  caution.  As  data  provision  is  not  compulsory,  there  are  also  some 
discrepancies between the data reported by various data sources.  

Granular cost data and itemisation:  

Estimates  on  the  total  costs  were  collected  from  feedback  from  stakeholders  (see 
Annex 3).  A  general  cost  mapping  based  on  a  broad  sample  of  responses  was  not 
possible.  

This has been accommodated through targeted consultations.  

As a result, operation of individual ELTIFs might deviate from the median metrics due to 
the  small  ELTIFs  sample.  Operational  difficulties,  costs  and  constrains  are  likely  to  be 
higher  in  case  they  deviate  because  smaller  funds  are  less  inclined  to  answer  and  face 
higher costs on a relative basis.  

Quantitative forecast on baseline scenario and effect of policy action:  

Historical data on the uptake and operation of ELTIFs and the drivers thereof is limited. 
As  a  result,  the  expected  growth  rate  based  on  a  multivariate  forecast  cannot  be 
estimated.  

Qualitative forecast on baseline scenario and effect of policy action:  

A fund manager's decision to design and establish an ELTIF and to market it to a set of 
investors  –  possibly  on  a  cross-border  basis  –  will  be  influenced  by  discretionary 
strategic  considerations  on  the  one  hand,  idiosyncratic  nature  of  the  target  assets, 
maturity profile sought after, the attractiveness of the local market, competition, taxation 
considerations,  market  conditions,  and  many  other  factors.  The  latter  include  structural 
factors of the local market, expected demand, expected profitability and scalability, etc.  

In addition, a number of important out-of-scope drivers (e.g. taxation) was identified as 
summarised by the problem tree. As a result, it is not feasibility to have point estimates 
on cost reduction induced by option policies in view of the lack of both a representative 
stakeholders’ sample size and the historical data on these drivers that shape the decision 
process of setting up and managing an ELTIF.  

Overall, significant efforts have been undertaking to support the analysis of the operation 
of the ELTIFs  and the evaluation  of policy options  based on  three-fold  methodological 
approaches. Each of them has its merits but also its limitations.  

93 

 
 
 
 
 
 
 
 
 
 
 
 
 
As  the  combined  evidence  stemming  from  the  various  methodological  approaches 
provide corroborating evidence, it can be considered to be a sound basis for the impact 
assessment despite the inherent limitations of each of the individual approaches. 

94 

 
 
 
ANNEX 5: EVALUATION OF RELEVANT PROVISIONS OF THE ELTIF REGULATION  

1.  

Introduction 

1.1.  Objective of the evaluation 

The ELTIF is  a pan-European regime  for Alternative  Investment  Funds  (AIFs) that  channel 
capital  towards  long-term  investments  in  the  real  economy  in  support  of  the  EU’s  goal  of 
smart, sustainable and inclusive growth. ELTIFs can only invest in certain types of assets in 
order  to  provide  both  retail  and  professional  investors  with  long-term,  stable  returns  while 
stimulating employment and economic growth. 

There are two main reasons for the review of the framework: 

1)  The  legal  mandate  under  Article  37  of  the  ELTIF  Regulation  requires  that 

Commission review the functioning of the framework; and, 

2)  There  is  a  need  to  assess  the  general  functioning  of  the  framework  given  the  low 

uptake by the market of ELTIFs which has not met expectations. 

In this context, the purpose of the evaluation is to assess to what extent the existing EU rules 
on  ELTIFs  have  met  their  principle  objectives  and  in  particular  whether  they  have  been 
efficient,  effective,  coherent,  and  relevant  and  have  provided  EU  added-value.  This 
retrospective evaluation has been conducted in parallel with the impact assessment work and 
is  presented  herein.  The  results  of  the  evaluation  have  been  incorporated  in  the  problem 
definition of the impact assessment. 

1.2. 

Scope of the evaluation 

This evaluation does not constitute a full review of the ELTIF Regulation; as the regulation is 
still  relatively  new,  particularly  when  compared  to  other  frameworks  such  as  UCITS,  the 
focus has been primarily on re-calibrating specific limitations in the framework to better meet 
the needs of investors and managers based on the feedback received.  

As  such,  the  evaluation  provides  an  assessment  of  the  ELTIF  Regulation  focusing  on  the 
potential  factors  that  may  have  prevented  the  wider  distribution  of  investment  funds  as 
compared to  initial  expectations. To the  extent possible, the evaluation assesses the rules in 
the context of the five evaluation criteria, as required by the Better Regulation guidelines. 

2.  

Background to the initiative 

2.1.  Description of the initiative and its objectives  

The  ELTIF  Regulation  was  published  in  the  Official  Journal  on  19  May  2015  and  allowed 
authorised  Alternative  Investment  Managers  (AIFMs)  to  market  their  AIFs  managed  as 
ELTIFs  across  the  Union  under  an  EU-wide  passport  subject  to  the  notification  procedure 
established under the AIFMD.  

The Regulation sets out the rules and criteria governing the funds eligible assets, investment 
policies and operating conditions in order to qualify as an ELTIF. These include that the fund 
must  be  managed  by  an  authorised  AIFM;  invest  at  least  70%  of  its  capital  in  eligible 

95 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
investments;  comply  with  limits  on  the  use  of  leverage  and  derivatives;  and  comply  with 
specific redemption-related requirements. 

As  the  ELTIF  is  designed  as  retail  AIF  product,  it  also  includes  a  number  of  investor 
protection  provisions,  including  a  suitability  test.  Retail  investors  with  portfolios  of  up  to 
EUR 500,000 cannot invest in aggregate more than 10% of their portfolio in ELTIFs and must 
make a minimum investment of EUR 10,000. 

One  of  the  main  objectives  of  the  ELTIF  Regulation  was  to  establish  a  single  market  for 
ELTIFs, in particular through the creation of a marketing passport, which allows funds to be 
marketed across the EU without additional authorisation in each Member State. 

The ELTIF Regulation was conceived with a number of objectives: 

a)  to channel increased capital flows to real economy investments; 
b)  to  provide  an  AIF  product  accessible  to  retail  investors  with  long-term  investment 

needs; and 

c)  to establish an EU-wide passport for the marketing of ELTIFs. 

In  addition,  the  ELTIF  can  also  support  the  post-pandemic  recovery  by  increasing  the 
availability of financing for European SMEs. 

2.2. 

State of play 

According  to  ESMA’s  register  of  ELTIFs,  as  on  October  2021  there  were  57  authorised 
ELTIFs  with  total  assets  under  management  of  around  EUR  2.4  billion.  The  funds  are 
domiciled in only four Member States – Luxembourg, France, Italy and Spain. 

While the ELTIF Regulation has been applicable for around 6 years, the level of market take-
up has not met expectations and is sub-optimal in terms of the total AuM.  

In June 2020, the CMU  High  Level Forum published its report on the CMU which made  a 
number  of  recommendations  to  amend  the  ELTIF  framework  and  improve  its  effectiveness 
and attractiveness for fund managers and investors. These recommendations were supported 
by subsequent Council conclusions that called on the Commission to review the framework. 
105 

2.3.  Link of the ELTIF review with other policy initiatives 

AIFMD Review: 

Ten years after its adoption on 8 June 2011106, the current review of AIFMD has shown that 
AIFMD  has  met  its  objectives  to  seek  a  coherent  supervisory  approach  to  the  risks  that 
activities of AIFMs may generate (including stability risks) and to provide high-level investor 
protections  while  also  facilitating  EU  AIF  market  integration107.  Therefore,  the  AIFMD 
review  has  been  focused  on  improving  specific  areas.  More  precisely,  the  AIFMD  review 
contemplates the following key improvements: 

105  
Council  of  the  European  Union  Conclusions  on  the  Commission’s  CMU  Action  Plan.  Reference  12898/1/20. 
ECOFIN  1023.  Point  19(e).  Adopted  2  December  2020.  Source:  https://data.consilium.europa.eu/doc/document/ST-12898-
2020-REV-1/en/pdf (8 February 2021). 
106  
The last Member State transposing the AIFMD completed this process by the end of 2015. 
107  

Following its transposition into the national legal systems, the  AIFMD entered into application on 22 July 2013. 

See Recitals 2 - 4 and 94 of the AIFMD.  

96 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1.  Levelling the playing field for loan originated by AIFs.  
2.  Enabling cross-border access of depositary services to allow the creation of AIFs in 

few European markets where there is no depositaries service. 

3.  Clarifying and aligning the delegation regimes under AIFMD and UCITS Directive. 
4.  Strengthening the liquidity framework for open-ended investment funds. 
5.  Improving supervisory data by collecting more granular supervisory data from AIFMs 

and UCITS. 

6.  Clarifying rules related to custodians of AIFs assets  

As ELTIFs are a sub-category of AIFs, they will benefit from these clarifications. While the 
proposals under these two reviews are compatible, a special attention should be paid to during 
the drafting of the new ELTIF and AIFMD rules with regard the following points: 

1.  Cross-border  access  to  depositary  services:  This  policy  option  may  reduce 
operating costs for ELTIF managers in smaller markets that may currently be under-
serviced  by  depositaries  –  which  aligns  with  the  objectives  of  the  ELTIF  review. 
However, it is difficult to assess and is not expected to affect existing ELTIFs as these 
are  currently  concentrated  in  those  Member  States  that  are  unlikely  to  be  under-
serviced by depositaries. 

2.  Clarifying  the  delegation  regime  under  AIFM  and  UCITS  Directive:  Depending 
on their organisational and fund structures, this may impact AIFMs managing ELTIFs 
if  they  have  to  make  changes  to  their  operating  structures  to  meet  new  substance 
requirements related to their use of delegation. This could lead to increased operating 
costs  for  those  AIFMs  that  are  not  currently  adequately  resourced  to  monitor  the 
activity of their delegates.  

3.  Clarifying custodian rules: This policy option will have no direct impact on ELTIFs. 

4.  Liquidity  Management  Tools:  This  policy  option  is  targeted  at  open-ended  AIFs 
with  illiquid  assets  while  ELTIFs  are  closed-ended  funds.  This  proposal  should 
therefore not directly impact on ELTIFs.  

5.  Improving  supervisory  reporting:  This  policy  option  may  impact  on  AIFMs 
managing ELTIFs that will have to provide more granular supervisory reporting data. 
One-off costs for AIFMs to update their reporting systems may be incurred when the 
ECB and ESAs update their reporting requirements. 

6.  Harmonised  rules  for  Loan  Originating  Funds:  This  measure  is  intended  to 
improve  the  credit  risk  management  and  supervisory  oversight  of  AIFs  that  are 
focused  on  loan  origination  and  classified  as  such  for  their  primary  strategy. 
Depending on the approach taken in the AIFMD review to classify a fund as a Loan 
Origination Fund and whether the additional requirements apply, these measures could 
potentially  apply  to  those  AIFMs  managing  ELTIFs  that  are  focused  on  loan 
origination strategies. This could lead to increased costs for AIFMs. 

It is important to note that the AIFMD is proposing targeted amendments to the regime as the 
framework  is  regarded  as  functioning  effectively.  Based  on  the  current  proposal  certain 
measures  may  lead  to  increased  costs  for  AIFMs  managing  ELTIFs,  but  these  would  be 
outweighed by the need to support adequate supervisory oversight of the AIF sector to ensure 
investor  protection  and  broader  financial  stability,  and  there  are  no  outright  conflicting 

97 

 
 
 
 
 
 
 
 
 
proposals between the two reviews. The simultaneous review process is also ensuring ongoing 
coherence between the two initiatives. 

Link with the MiFID: 

The ELTIF Regulation  is  linked with the MiFID  II by virtue of definitions and notions that 
are  cross-linking  to  the  AIFMD,  and  in  turn,  cross-linking  ELTIFs  to  the  MiFID  II  regime. 
Despite this fact, the review of the MiFIDII/MiFIR regime will have no direct implications on 
the ELTIF regime because the scope of the two reviews is very different. Any such links will 
be  distant  and  non-immediate.  That  is  mainly  because  the  pursued  amendments  of  the 
MiFIDII/MiFIR regime are primarily focused on the consolidated tape, and transparency, and 
waivers, which will have no relevance for the operation of ELTIFs or their managers.  

There are no discussions or possible implications for ELTIFs in terms of investor qualification 
or categorisation, as such topics fall outside the current MiFID II review initiative. 

Link with the Solvency II: 

The ELTIF Regulation is laying down a regulation for long-term investment funds, which is 
very distant from the regulation of insurance companies under Solvency II Regulation.  

During  the  open  public  consultation,  some  stakeholders  advocated  for  a  review  of  the 
Solvency II rules. In particular, the High-Level Forum on the CMU report recommended the 
promotion of institutional investor take up and to “consider explicit recognition of the ELTIF 
in  relevant  capital  frameworks  (e.g.  Solvency  II),  and  provide  appropriate  flexibility  for 
investment  strategies  attractive  to  institutional  investors  to  be  addressed  within  the  ELTIF 
framework”.108  At  this  junction  no  adjustment  to  the  capital  treatment  of  ELTIFs  is  being 
proposed as part of the Solvency II framework or its near-term review.  

3.   Methodology 

In preparing for the ELTIF review, the Commission  conducted an open public consultation. 
There  were  also  a  large  number  of  bilateral  consultations  with  representatives  from  the 
investment  management  industry  including  managers  with  established  ELTIFs,  NCAs 
responsible  for  supervising  ELTIFs  and  a  number  of  Member  States.  This  evaluation  was 
based on  a full  analysis  of the large  amount of feedback received to  identify the key issues 
and concerns about the ELTIF framework and to develop the resulting policy options to make 
targeted changes. 

As  regards  the  involvement  of  ESMA,  the  outcome  of  the  open  public  consultation  and 
additional feedback received via the submissions and consultations with market participants, 
please refer to Annex 2. 

3.1.  Back-to-back evaluation 

The ELTIF framework is a targeted product specific regulation with specific interactions with 
the AIFMD. It has specific objectives to develop the market for long-term focussed retail AIF 
product. The proposed amendments to the ELTIF framework do not constitute a fundamental 

108  
For the purpose of capital requirements, Solvency II framework already treats ELTIF by (a) using the same capital 
charge as for listed equity (i.e. 39% instead of 49%) and (b) having a simpler access to the preferential treatment for long-
term equity investments (i.e. 22%) as the criteria to be met are assessed at the level of the ELTIF fund and not the underlying 
assets. 

98 

 
 
 
 
 
 
 
 
 
 
 
 
                                                           
overhaul of the framework but are rather targeted changes to introduce additional flexibilities 
for  managers  and  improve  access  for  investors  while  maintaining  the  existing  investor 
protections.  

As most of the policy options are technical in nature, the evaluation is structured to build upon 
the  findings  of  the  consultations  detailed  earlier,  market  data  and  relevant  studies.  These 
sources and consultations highlighted certain common themes, weaknesses and opportunities 
of the ELTIF framework. These are set out in more detail in the graph below: 

3.2.  Limitations 

The  evaluation  is  based  on  the  findings  of  a  range  of  consultations  with  stakeholders 
including representatives from industry, industry associations, regulators and Member States. 
Given the relatively limited size of the ELTIF universe, the results could be prone to selection 
bias  and  the  limited  number  of  respondents  with  actual  experience  of  using  the  ELTIF 
product. 

The  analysis  targets  the  main  issues  with  the  framework  raised  by  stakeholders  and  has 
attempted to assess the development of the ELTIF market in the context of its overall size as 
an indicator of its achievement of its objectives and contribution to the CMU.  

There are particular difficulties in obtaining reliable data on the market given its limited size 
and concentration. In addition, detailed information on fees and costs is not publicly available 
and is  provided only to  the funds investors as it  is  confidential  information specific to  each 
ELTIF manager. 

Despite the fact that ESMA is charged with the task to maintain an ELTIF register, it can be 
estimated that ESMA has faced a degree of difficulties in the constitution and updating of the 
ELTIF  register,  including  the  processing  and  following  up  on  the  NCAs’  notifications 
regarding the status of authorised ELTIFs. It should be noted that as of Q1 2021 ESMA has 
not  constituted  a  formal  electronic  register  of  ELTIFs  and  such  register  is  currently 
maintained as an Excel file available at the website of ESMA. Information on the size of the 
funds, their portfolio composition, pursued strategies, as well as performance, fees and which 

99 

 
 
 
  
 
 
 
 
categories  of  investors  is  ELTIFs  marketed  to  are  not  available  in  the  ELTIF  register. 
Furthermore,  it  has  proved  challenging  to  gather  information  on  the  ELTIFs  fund 
documentation (such as prospectuses, KIDs, annual reports), and the information on fees and 
performance was rarely available. 

Receiving  such  an  information  required  ESMA  to  seek  such  an  information  from  the 
representatives of the NCAs. To that end, Article 3(3) of the ELTIF Regulation sets out that 
the  competent  authorities  of  the  ELTIFs  shall,  on  a  quarterly  basis,  inform  ESMA  of 
authorisations  granted  or  withdrawn  pursuant  to  the  ELTIF  Regulation.  In  reality,  it  has 
proved challenging to receive an up-to-date information from the NCAs, which have lamented 
the  need  to  revert  back  to  their  stakeholders  for  the  up-to-date  figures  and  deemed 
burdensome.  

It  is  also  difficult  to  assess  potential  cost  implications  as  the  final  outcome  of  the  AIFMD 
review  will  also  potentially  introduce  changes  that  could  impact  on  the  operating  costs  of 
AIFMs  managing  ELTIFs  as  these  costs  apply  irrespective  of  the  ELTIF  framework  and 
cannot  be  assessed  as  part  of  the  ELTIF  review  until  there  is  clarity  on  the  outcome  of  the 
AIFMD review. 

The measures proposed are designed to improve the flexibility for fund managers in how they 
operate  the  ELTIF  funds,  making  the  framework  more  adaptable  to  a  wider  range  of 
investment strategies and are considered to be cost neutral with respect to the fund managers 
operating costs as they do not amend the existing reporting or disclosure requirements.  

The  proposed  changes  are  closely  linked  and  correlated  making  it  difficult  to  assess  their 
impact  in  quantitative terms. This  has made it necessary to  rely on  a qualitative assessment 
and stakeholder’s responses regarding the potential outcomes. 

4.  

Evaluation questions 

In  general,  the ELTIF Regulation has not  met  expectations in  terms  of market  development 
and  uptake.  With  only  57  funds  on  ESMA’s  register  of  ELTIFs  and  total  assets  under 
management  of  approximately  EUR  2.4  billion the  market  for  ELTIFs  concentrated  in  only 
four  Member  States,  the  market  has  failed  to  scale  up  significantly  and  this  impairs  its 
effective contribution to the CMU and development of the real economy.  

Stakeholder  feedback  has  highlighted  market  concern  at  the  overly  restrictive  provisions  of 
the  regulation  that  limit  the  ability  to  develop  strategies  for  ELTIFs  and  access  a  sufficient 
range  of  eligible  investments.  The  entry  tests  for  retail  investors  are  overly  restrictive  and 
prevent most investors from accessing ELTIF products. 

Question 1: How effective has the EU intervention been? 

To what extent have the objectives of the ELTIF Regulation to establish a single market for 
ELTIFs been achieved and what factors influenced the achievements observed? 

The ELTIF Regulation, while still relatively new when compared to other frameworks such as 
UCITS,  has  not  scaled  up  significantly  and  has  not  been  widely  adopted  by  EU  investment 
managers as evidenced by the limited number of registered funds and concentration in a small 
number of Member States limiting the creation of a single market for ELTIFs. 

100 

 
 
 
 
 
 
 
 
 
 
 
 
The  majority  of  stakeholders  indicated  in  their  response  to  the  public  consultation  that  the 
ELTIF  framework  has  not  achieved  its  objectives  and  highlighted  a  number  of  areas  that 
should be amended. 

For  example,  in  terms  of  the  universe  of  eligible  assets  and  investments,  ELTIFs  contain 
restrictions regarding the ability of ELTIFs to invest in “financial undertakings”. Further, the 
ELTIF  Regulation  contains  a  numeric  threshold  that  requires  that  eligible  investment  assets 
should  include  real  assets  with  a  value  of  more  than  EUR  10  million.  Next,  the  ELTIF 
Regulation contains the maximum threshold of EUR 500 million for the market capitalisation 
of  listed  qualifying  portfolio  undertakings,  as  well  as  a  requirement  that  the  qualifying 
portfolio  undertaking  is  a  “majority  owned”  subsidiary.  Whilst  there  are  potentially  valid 
policy reasons for respective ELTIF provisions in channelling investments to projects with a 
certain size and characteristics, evidence suggests that many of those requirements are serving 
as  tangible  deterrents  for  the  investments  by  ELTIFs  and  reduce  the  attractiveness  of  the 
ELTIF regime in the eyes of asset managers. 

Second, as regards the borrowing of cash requirements the current ELTIF Regulation sets out 
that the maximum allowed leverage is 30% of the capital of ELTIFs and that the borrowing 
should  encumber  assets  that  represent  no  more  than  30  %  of  the  value  of  the  capital  of  the 
ELTIF.  Against  this  background,  the  30%  leverage  restriction  may  constitute  a  genuine 
limitation  for  some  ELTIF  managers  to  pursue  certain  legitimate  investment  strategies.  For 
instance, investment in real assets with a 30% maximum leverage could per se fall short of the 
capital-intensive nature of such investment strategies where higher degree of leverage may be 
prevalent.109. 

Third, portfolio diversification and concentration rules for ELTIFs marketed to investors are 
also  excessively  restrictive  and  prevent  the  ELTIF  framework  to  foster  the  uptake  among 
asset  managers.110  Given  the  nature  of  long-term  projects  it  may  often  occur  that  finding  a 
portfolio  of  a  large  number  of  underlying  portfolio  investments  (especially  real  assets)  is 
prohibitively expensive due to high transactional costs and thus uneconomical given the size 
of  ELTIFs.  The  excessive  costs  of  too  broad  diversification  and  portfolio  composition 
requirements were also flagged as problematic by stakeholders during the public consultation 
and selected consultations.  

Question 2: How efficient has the EU intervention been? 

To what extent have the rules regarding establishment and the marketing of ELTIFs under the 
ELTIF Regulation been cost-effective? Are there significant differences in costs (or benefits) 
between Member States and what is causing them? 

Fund level cost data is not publicly available. Based on overall market statistics the uptake of 
ELTIFs has  not  scaled up to  the desired level  in terms  of the number of funds, their spread 
across  Member  States  and  total  assets  under  management.  In  particular,  the  framework  is 
overly restrictive in terms of its barriers to entry for retail investors.  

109  
For ELTIFs to be a credible source of funding for these projects, it is important appreciate the restrictive nature of 
leverage limitations as potentially handicapping the risk-adjusted returns and hence viability of certain long-term strategies. 
There are reduced stability risks stemming from ELTIFs: they are closed-end AIFs with diversification rules and subject to 
the  regulatory  oversight  under  the  AIFMD.  Consideration  should  also  be  given  to  the  importance  of  providing  profitable 
products  for  both  professional  investors  and  retail  investors.  Finally,  under  AIFM  regulatory  framework,  NCAs  supervise 
leverage and may impose additional limits as part of their ongoing monitoring. 
110  
As  recognised  by  ESMA  in  its  technical  advice  to  the  Commission,  "The  limits  of  risk  spreading  (portfolio 
composition and diversification related thresholds referred to in Article 13(2)(a) to (c), generally speaking, imply to make 10 
investments. In relation to investment in projects or infrastructures of large scale, the need to make 10 investments per ELTIF 
may be difficult to achieve, and costly in terms of capital allocation."  

101 

 
 
 
 
 
 
 
                                                           
First, the EUR 10,000 minimum initial investment participation (the so-called “entry ticket”) 
required  by  the  ELTIF  Regulation  constitutes  a  tangible  barrier  to  the  access  of  retail 
investors. Whilst the ELTIF Regulation seeks to ensure that the initial amount invested in one 
or more ELTIFs is not less than EUR 10,000, it prevents the retail investors to get exposure to 
long-term investment projects and limits their capacity to earn respective risk-adjusted returns 
from  such  investments.  This  threshold  constitutes  a  problem  because  of  a  strong  dissuasive 
effect of such a threshold on the willingness of retail investors to commit at least EUR 10,000 
as opposed to a potential appetite to commit smaller amounts. 

Second, the limitation of 10% aggregate investment amount for those retail investors whose 
portfolio does not exceed EUR 500,000 represents a significant barrier to fund inflows from 
retail  investors.  This  threshold  is  problematic  and  is  judged  by  the  industry  participants  as 
subjective and essentially unenforceable as the calculation is based on self-reporting by retail 
investors and there is no possibility for the asset managers or distributors to determine which 
other  ELTIFs  the  investors  may  have  invested  in.  The  threshold  is  also  arbitrary,  since  it 
imposes an aggregate 10% limit on retail investors with portfolios below EUR 500,000 (thus 
limiting  the  capacity  to  invest  by  less  wealthy  citizens)  and  prevents  retail  investors  from 
increasing their holding in ELTIFs once a 10% portfolio allocation “quota” has been reached. 
The  10%  aggregate  investment  requirement  of  the  ELTIF  Regulation  constitutes  a  tangible 
barrier  to  the  access  of  retail  investors,  especially  in  combination  with  the  minimum  EUR 
10,000 investment ticket.  

Third,  the  ELTIF  Regulation  contains  distinct  requirements  for  the  assessment  of  retail 
investor's  knowledge  and  experience.111  Current  provisions  of  the  ELTIF  Regulation 
essentially require ELTIF managers to assess whether the ELTIF is suitable for marketing to 
retail  investors,  and  conduct  a  suitability  test  assessing  the  retail  investor's  knowledge  and 
experience, financial situation and their investment objectives. This ELTIF-specific suitability 
test  is  seen  as  problematic  self-standing  sectoral  and  partially  duplicative  framework  that  is 
both  inefficient,  unknown  to  the  industry  and  less  effective  than  a  more  familiar  MiFID  II 
suitability test to which asset managers and product distributors commonly adhere.  

A  majority  of  stakeholders  were  either  neutral  or  positive  in  their  assessment  of  the  cost 
burden of the ELTIF framework.  

Question 3: How relevant is the EU intervention? 

To  what  extent  are  the  rules  still  relevant  and  how  well  do  the  original  objectives  of  the 
ELTIF Regulation correspond to the current needs within the EU? 

The majority of stakeholders indicated their agreement with the perspective that the ELTIF is 
consistent with the objectives of the CMU. The majority of stakeholders also support further 
policy action in the areas identified in this evaluation. 

The ELTIF  can play an  important  role in  directing capital  into long-term investments  while 
ensuring adequate protection for investors, in particular retail clients. The Regulation does not 
require a fundamental re-write but its attractiveness to fund managers and investors could be 

111  
Article 28(1) of the ELTIF Regulation sets forth that when directly offering or placing units or shares of an ELTIF 
to  a  retail  investor,  the  manager  of  the  ELTIF  shall  obtain  information  regarding  the  following:  (a)  the  retail  investor's 
knowledge and experience in the investment field relevant to the ELTIF; (b) the retail investor's financial situation, including 
that  investor's  ability  to  bear  losses;  (c)  the  retail  investor's  investment  objectives,  including  that  investor's  time  horizon. 
Based on the information obtained under the first subparagraph, the manager of the ELTIF shall recommend the ELTIF only 
if it is suitable for that particular retail investor. 

102 

 
 
 
 
 
 
 
 
 
                                                           
improved  with  a  re-calibration  of  the  restrictions  on  the  fund  managers  and  reducing  the 
barriers to entry for retail clients. 

For example, with respect to adding additional redemption mechanisms for investors. Long-
term  assets  are  typically  rather  illiquid  because  they  tend  to  be  idiosyncratic,  rarely 
standardised and not traded on secondary markets. The value of such long-term assets often 
reflects  the  net  present  value  of  discounted  cash  flows  generated  by  the  underlying  project 
which  investors  anticipate  for  a  given  holding  period.  The  underlying  illiquidity  and  poor 
price  transparency  is  not  common  in  more  liquid  (financial)  assets  which  tend  to  be  more 
standardised, frequently traded (for instance, financial instruments are customarily traded on 
trading  venues)  and  provide  readily  available,  market  valuation-driven  and  transparent 
valuation of such assets. 

The  illiquidity  of  assets  incentivises  investors  to  adopt  a  longer-term  investment  strategy. 
Commonly  termed  ‘closed-ended’  funds  are  a  commonplace  approach  for  pooling 
investments  into  such  assets.  These  funds  rarely,  if  at  all,  have  to  buy  and  sell  assets  as 
investors enter or exit the fund, any may even be closed to redemptions for a protracted period 
of  time  during  which  fund  managers  focus  on  collectively  managing  the  investments  and 
executing  upon  the  investment  strategy.  In  case  of  such  “closed-ended”  funds  investors’ 
capital commitments may typically be redeemed only after a normally predetermined number 
of  years  or  upon  other  exceptional  circumstances  set  out  in  advance  in  the  fund 
documentation.  Limited  redemption  rights  during  the  life  of  the  fund  permits  the  asset 
manager  to  invest  in  long-term  assets  that  are  illiquid  without  the  threat  of  constant 
redemptions that could undermine the liquidity and the viability of the fund.112 

This discussion on the liquidity profile of funds is also relevant in the context of the ELTIF 
review.  While  individual  investors  may  be  interested  in  investing  in  an  ELTIF,  the  illiquid 
nature  of  most  investments  in  long-term  projects  precludes  an  ELTIF  from  offering  regular 
redemptions to its investors. The commitment of the individual investor to an investment in 
such assets is, by its nature, made to the full term of the investment. ELTIFs has, as a result, 
been intentionally structured in principle so as not to offer regular redemptions before the end 
of  the  life  of  the  ELTIF.  In  this  connection,  ELTIF  Regulation  sets  for  that  investors  in  an 
ELTIF shall not be able to request the redemption of their units or shares before the end of the 
life of the ELTIF. Furthermore, the ELTIF Regulation sets out that redemptions to investors 
should (typically) be possible solely at the end of the life of the ELTIF (Article 18(1) of the 
ELTIF Regulation). 

Introducing  additional  redemption  mechanisms  into  the  framework  could  improve  its 
attractiveness for investors that may be discouraged from committing significant amounts of 
capital for extended lock-up periods. The ability to redeem prior to the funds maturity could 
be implemented in a way that protects the interests of the different investors (those redeeming 
and those remaining in the fund) while limiting the potential cash drag and costs for the fund 
manager. 

112  
On  the  other  hand,  units  or  shares  in  a  closed-ended  fund  may  benefit  from  a  secondary  market,  meaning  that 
investors may exchange the units of the fund between themselves. This form of trading does not, however, guarantee daily 
liquidity because when the fund performs badly or during stressed market situations, the secondary market has a tendency to 
freeze, forcing the investors to remain invested.  

103 

 
 
 
 
 
 
                                                           
Question 4: How coherent is the EU intervention? 

To  what  extent  are  rules  set  out  in  the  ELTIF  Regulation  coherent  with  other  pieces  of  EU 
legislation? 

The  ELTIF  Regulation  is  a  product  specific  framework  established  under  the  AIFMD.  The 
objectives of the ELTIF are aligned with those of the CMU. 

Question 5: What is the EU-added value of the EU intervention? 

To what extent have the relevant rules increased the uptake in the ELTIFs and to what extent 
does this matter continue to require action at EU level? 

Stakeholder  feedback  to  the  public  consultation  identified  a  number  of  key  issues  with  the 
ELTIF framework, in particular overly restrictive rules on portfolio composition and barriers 
to entry for retail investors. 

The purpose of the ELTIF Regulation remains valid in terms of providing retail investors with 
long  term  investment  products,  serving  as  a  channel  for  capital  investment  in  the  real 
economy and supporting the objectives of the CMU. Based on consultations with industry, the 
framework  could  benefit  from  a  recalibration  of  these  restrictions  to  improve  the 
attractiveness and usability of ELTIFs for fund managers. 

6.  

Conclusions 

With regard to the effectiveness, the ELTIF framework seeks to establish a single market in 
ELTIFs. Despite some success, the evaluation indicates that the single market in ELTIFs falls 
short  of  realising  its  full  potential  in  terms  of  scale-up  and  net  assets  and  as  such,  the 
objectives of the ELTIF framework have not been completely achieved.  

The analysis in  this  evaluation  suggests that  – among other factors  –  overly  restrictive fund 
rules,  limitations  on  the  scope  of  eligible  assets  and  investments,  regulatory  barriers  and 
diverging or difficult to understand national requirements and practices, are among the factors 
limiting the uptake of ELTIFs.  

104 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANNEX 6: STATISTICAL DATA ON THE ELTIFS  

The  statistical  data  on  ELTIFs  is  based  on  the  register  of  authorised  ELTIFs  published  by 
ESMA113. The ELTIF register has last been updated on 27 April 2021, and may be subject to 
change. 

1. 

General overview of ELTIFs per jurisdiction 

National  competent  authorities  of  only  four  Member  States  (France,  Italy,  Luxembourg  and 
Spain)  have  issued  ELTIF  authorisations.  As  presented  on  the  graph  above,  in  2021  the 
number of ELTIFs has grown substantially, albeit from a low base, in Luxembourg, Italy and 
France and has remained the same in Spain. 

2. 

Marketing of ELTIFs 

Whilst  the  majority  of  ELTIFs  are  solely  marketed  in  the  jurisdiction  of  its  domicile,  some 
ELTIFs  may  be  marketed  in  several  Member  States.  The  above  graph  demonstrates  the 
aggregate number of ELTIFs marketed across the Union. 

According  to  the  information  compiled  by  ESMA,  out  of  57  authorised  ELTIFs  only  39 
ELTIFs  are  actively  marketed  to  investors  with  the  remaining  18  ELTIFs  not  yet  being 

113  
ESMA  register  of  authorised  ELTIFs.  ESMA34-46-101.  Source:  https://www.esma.europa.eu/document/register-
authorised-european-long-term-investment-funds-eltifs  (29  May  2021).  In  addition,  certain  information  on  the  net  assets, 
portfolio composition, etc has been sourced from the 2021 ELTIF Survey conducted by ESMA. 

105 

 
 
 
 
 
 
 
 
 
 
 
 
                                                           
operational.  As on April 2021, a total  of 16 ELTIFs  are marketed to  retail  investors and 11 
ELTIFs are not marketed to retail investors. Due to limited information on the investor base, 
no historical comparison vis-à-vis 2020 figures is possible. 

3. Net assets and portfolio composition 

According to the information compiled by ESMA, the total size of the ELTIF segment (assets 
under  management)  has  grown  from  slightly  above  EUR  1.5  billion  in  2020  to  around 
EUR 2.4  billion  in  2021.  Despite  the  substantial  relative  growth,  when  compared  to  the 
overall EU AIF size of EUR 6.8 trillion ELTIFs remain a very small niche segment.  

As regards the portfolio composition, based on the 2020 ELTIF survey conducted by ESMA, 
60% of ELTIFs’ capital was invested into loans to qualifying undertakings, 11% into equities 
and 6% in fixed income. The 2021 ELTIF survey conducted by ESMA provides no visibility 
into ELTIF portfolio holdings and the historic comparison has therefore proved impossible. 

4. 

List of ELTIFs 

The  list  below  is  compiled  by  ESMA  and  demonstrates  the  list  of  authorised  ELTIFs  as 
on 29 September 2021. 

NCA 

ELTIF manager 

Name of the ELTIF  Home 

Member 
State 

Min. investment amount  

Where 
ELTIF is 
marketed 

1  CNMV 

SOLVENTIS, SGIIC, 
S.A 

2  CNMV 

TALDE 
GESTIÓN,SGEIC,S.A. 

3  AMF 

MÉRIDIAM SAS 

4  AMF 

BNP PAM 

FONDO DE 
INNOVACION, 
FILPE 

TALDE DEUDA 
ALTERNATIVE, 
FILPE 

MERIDIAM 
INFRASTRUCTURE 
EUROPE III SLP 
BNP PARIBAS 
EUROPEAN SME 
DEBT FUND 

ES 

ES 

EUR 100,000 

ES 

ES 

EUR 100,000 

FR 

FR 

EUR 20 million 

FR 

FR, LU, BE 

Could not be identified 

5  AMF 

6  AMF 

7  AMF 

AMUNDI PRIVATE 
EQUITY FUNDS 

AMUNDI ETI 
MEGATENDANCES 

FR 

FR 

AMUNDI PRIVATE 
EQUITY FUNDS 

CAA ETI 
MEGATENDENCES 

FR 

FR 

MANDARINE 
GESTION 

NOVESS - LE 
FONDS ESS 

FR 

FR 

EUR 3 million 

EUR 30 million 

EUR 5 million 

106 

 
 
 
 
 
 
 
 
 
 
 
8  AMF 

TURENNE CAPITAL 
PARTENAIRES SA 

FPCI EMERGENCE 
ETI 

FR 

FR 

9  AMF 

MIROVA 

BTP IMPACT 
LOCAL 

FR 

FR 

TURENNE CAPITAL 
PARTENAIRES SA 

FPCI CAPITAL 
SANTE 2 

OCTOBER ITALIAN 
SME FUND 1 

OCTOBER SME IV 

FR 

10  AMF 

11  AMF 

12  AMF 

13  AMF 

14  AMF 

OCTOBER 
FACTORY 

OCTOBER 
FACTORY 

TIKEHAU 
INVESTMENT 
MANAGEMENT 
GENERALI GLOBAL 
INFRASTRUCTURE 

EUR 1 million 

EUR 5 million 

EUR 250,000 

Could not be identified 

Could not be identified 

FR, LU, BE, 
NL 

FR, BE, DE, 
ES, IT, NL 

FR, BE, DE, 
ES, IT, NL 

T2 ELTIF ENERGY 
TRANSITION FUND 

FR 

FR, ES 

EUR 250,000 

GF 
INFRASTRUCTURES 
DURABLES S.L.P. 

FR 

FR 

ES, LU 

EUR 1 million 

EUR 20,000 

Umbrella  

15  AMF 

IDINVEST 
PARTNERS 

16  AMF 

17  AMF 

18  AMF 

TIKEHAU 
INVESTMENT 
MANAGEMENT 

TIKEHAU 
INVESTMENT 
MANAGEMENT 

TIKEHAU 
INVESTMENT 
MANAGEMENT 

FCPR IDINVEST 
ENTREPRENEURS 
CLUB 

ELTIF TIKEHAU 
DIRECT LENDING  

ELTIF TIKEHAU 
DIRECT LENDING - 
COMPARTIMENT 
EPI 

ELTIF TIKEHAU 
DIRECT LENDING - 
COMPARTIMENT 
DD 

19  Consob 

AMUNDI SGR S.p.A.  AMUNDI ELTIF 

ITALIA 2020 

20  Consob 

EURIZON CAPITAL 
SGR S.p.A. 

EURIZON ITALIAN 
FUND - ELTIF 

21  Consob 

The EURIZON 
CAPITAL SGR S.P.A. 

EURIZON PIR 
ITALIA - ELTIF 

22  Consob 

ANIMA SGR S.P.A. 

ANIMA ELTIF 
ITALIA 2026 

23  Consob 

PRAMERICA SGR 
S.P.A. 

PRAMERICA ITEЯ 
ELTIF 

24  Consob 

HEDGE INVEST SGR 
S.P.A. 

HI ALGEBRIS 
ITALIA ELTIF 

25  Consob 

CREDEM PRIVATE 
EQUITY SGR S.P.A. 

ELTIFPLUS 

26  Consob 

8A+ INVESTIMENTI 
SGR S.P.A. 

8A+ REAL ITALY - 
ELTIF 

27  Consob 

AMUNDI SGR S.P.A.  AMUNDI ELTIF 
AGRITALY PIR 

28  Consob 

ANTHILIA CAPITAL 
PARTNERS SGR 
S.P.A. 

ANTHILIA ELTIF 
ECONOMIA REALE 
ITALIA 

4 distinct categories, min. EUR 
100,000 for retail investors 

DE, BE, ES, 
LU 

5 distinct categories, min. EUR 
100,000 for retail investors 

Not yet 
marketed 

** 

IT 

EUR 100,000 

EUR 30,000 Euro 

IT 

IT 

IT 

IT 

IT 

IT 

IT 

EUR 10,000  

EUR 10,000 * 

EUR 30,000 * 

EUR 10,000 

EUR 10,000 * 

EUR 10,000 * 

EUR 15.000 * 

FR 

FR 

FR 

FR 

FR 

IT 

IT 

IT 

IT 

IT 

IT 

IT 

IT 

IT 

IT 

29  Consob 

AZIMUT LIBERA 
IMPRESA SGR S.P.A. 

ALI ELTIF PRIVATE 
EQUITY 

IT 

See footnote ** 

107 

 
 
 
 
 
 
30  Consob  MUZINICH & CO. 

SGR S.P.A. 

31  Consob 

EQUITA CAPITAL 
SGR S.P.A. 

32  CSSF***  AMUNDI 

LUXEMBOURG S.A.  

IT 

IT 

LU 

FIRSTLIGHT 
MULTI-STRATEGY 
ELTIF 
EQUITA SMART 
CAPITAL - ELTIF 

PI SOLUTIONS - 
(subfund) AMUNDI 
ELTIF LEVERAGED 
LOANS EUROPE  

See footnote ** 

EUR 10.000 * 

AT, DE, ES, 
FR, IT 

share class A: EUR 10.000;  
share Class E: EUR 100.000;  
share class H: EUR 1.000.000;  
share class I: EUR 5.000.000; 

AZIMUT 
INVESTMENTS S.A. 

AZ ELTIF - (subfund) 
OPHELIA 

LU 

IT 

EUR 10.000 

33  CSSF 

34  CSSF 

BLACKROCK 
FRANCE S.A.S. 

35  CSSF 

MUZINICH & CO. 
(IRELAND) LIMITED 

36  CSSF 

PARTNERS GROUP 
(LUXEMBOURG) 
S.A 

37  CSSF 

PARTNERS GROUP 
(LUXEMBOURG) 
S.A 

38  CSSF 

KAIROS PARTNERS 
SGR SPA 

39  CSSF 

BLACKROCK 
FRANCE S.A.S. 

40  CSSF 

AZIMUT 
INVESTMENTS S.A. 

LU 

LU 

LU 

LU 

BE, DE, DK, 
EL, ES, FI, 
FR, IE, IT, 
LU, MT, NL, 
PT, SE, NO 

Class A1 (≥€1,000,000 
<€25,000,000), Class A2 
(≥€25,000,000 <€50,000,000), Class 
A3 (≥€50,000,000), Class B1 
(≥€1,000,000 <€25,000,000), Class 
B2 (≥€25,000,000 <€50,000,000), 
Class B3 (≥€50,000,000), Classes 
C/D/F and X (≥€125,000) 

share Class H : EUR 5.000.000;  
share Class A : EUR 1.000.000;  
share Class R : EUR 50.000; 
share Class P: EUR 10.000 
EUR 125.000 

AT, DE, ES, 
FR, IT 

AT, BE, CY, 
DE, ES, FI, 
FR, IE, NL, 
SE 

AT, DE, DK, 
ES, FI, IT, 
SE 

share Classes R (EUR), P (EUR) : 
EUR 20.000; share Classes R (SEK), 
P (SEK) : SEK 200.000; share Class I 
(EUR): EUR 1.000.000 

LU 

IT 

share Class D : EUR 30.000;  
share Class P : EUR 50.000;  
share Class X : EUR 1.000.000 

LU 

DE, DK, ES, 
FI, FR, IT, 
LU, NL, PT, 
SE, CZ, EL, 
PL, IE, BE 

10 Share classes (A, B, C, D, E, F, G, 
H, I, J, X) The minimum subscription 
for an investment in the Compartment 
is EUR125,000, save that for Class I 
Shares and Class J Shares, it is 
EUR250,000, and for Class A Shares, 
it is EUR1,000,000. 

LU 

IT 

EUR 10.000 

BLACKROCK 
ALTERNATIVE 
FUNDS S.C.A., 
SICAV-RAIF - 
(subfund) 
BLACKROCK 
PRIVATE EQUITY 
OPPORTUNITIES 
ELTIF 
MUZINICH 
FIRSTLIGHT 
MIDDLE MARKET 
ELTIF SICAV, S.A. 
PARTNERS GROUP 
DIRECT EQUITY 
ELTIF S.C.A., 
SICAV-SIF - 
(subfund) PARTNERS 
GROUP DIRECT 
EQUITY 2016 (EUR) 
ELTIF  
PARTNERS GROUP 
PRIVATE MARKETS 
CREDIT 
STRATEGIES ELTIF 
S.C.A., SICAV- 
(subfund) CREDIT 
STRATEGIES 2017 
(EUR) 
KAIROS 
ALTERNATIVE 
INVESTMENT S.A. 
SICAV - (subfund) 
RENAISSANCE 
ELTIF 
BLACKROCK 
ALTERNATIVE 
FUNDS S.C.A., 
SICAV-RAIF - 
(subfund) 
BLACKROCK 
PRIVATE 
INFRASTRUCTURE 
OPPORTUNITIES 
ELTIF 
AZ ELTIF - (subfund) 
PENINSULA 
TACTICAL 
OPPORTUNITY 

108 

 
 
 
41  CSSF 

AZIMUT 
INVESTMENTS S.A. 

AZ ELTIF - (subfund) 
CAPITAL 
SOLUTIONS 

LU 

IT 

EUR 10.000 

KLIMAVEST ELTIF  LU 

DE 

EUR 10.000 

42  CSSF 

43  CSSF 

COMMERZ REAL 
FUND 
MANAGEMENT S.A 
R.L. 
PARTNERS GROUP 
(LUXEMBOURG) 
S.A 

PARTNERS GROUP 
PRIVATE MARKETS 
ELTIF SICAV 

LU 

BE, CY, CZ, 
DE, DK, EL, 
ES, FI, FR, 
IE, IT, LU, 
LI, MT, NL, 
PL, NO, PT, 
SE 

44  CSSF 

OQUENDO CAPITAL 
SGEIC S.A. 

OQUENDO IV ELTIF 
S.C.A. SICAV-RAIF 

LU 

ES 

45  CSSF 

46  CSSF 

47  CSSF 

AZIMUT 
INVESTMENTS S.A. 

AZ ELTIF (subfund) 
ALICROWD 

AZIMUT 
INVESTMENTS S.A. 

AZ ELTIF (subfund) 
DIGITAL LENDING 

NEUBERGER 
BERMAN AIFM S.À 
R.L. 

NB ALTERNATIVE 
FUNDS SICAV S.A. - 
(sub-fund) NB 
DIRECT PRIVATE 
EQUITY FUND A 
ELTIF 

LU 

LU 

LU 

IT 

IT 

Not marketed 
yet 

109 

share Classes RDR (EUR), P (EUR): 
EUR 20.000;  
share Classes RDR (USD), P (USD): 
USD 20.000;  
share class I (EUR): EUR 2.000.000;  
share class I (USD): USD 2.000.000;  
share class C (EUR): equivalent of 
USD 250.000.000;  
share class C (USD): USD 
250.000.000; 
Class A Shares are issued to any 
Shareholder of the Company 
committing equal or more than EUR 
1,000,000; and (b) Class B Shares are 
reserved to Oquendo Holding. (c) 
Class C Shares are issued to any 
Shareholder of the Company 
committing less than EUR 1,000,000. 
EUR 10.000 

EUR 10.000 

share Classes A EUR, A2 EUR, I 
EUR, M EUR, M2 EUR: EUR 50.000; 
share Class I2 EUR: EUR 50.000.000; 
share Class X EUR: EUR 25.000.000; 
share Classes M3 EUR, M4 EUR: 
EUR 25.000; share Classes A USD, 
A2 USD, I USD, M USD, M2 USD: 
USD 50.000; share Class I2 USD: 
USD 50.000.000; share Class X USD: 
USD 25.000.000; share Classes 
M3USD, M4 USD: USD 25.000; 
share Classes A GBP, A2 GBP, I 
GBP, M GBP, M2 GBP: GBP 50.000; 
share Class I2 GBP: GBP 50.000.000; 
share Class X GBP: GBP 25.000.000; 
share Classes M3 GBP, M4 GBP: 
GBP 25.000; share Classes A CHF, 
A2 CHF, I CHF, M CHF, M2 CHF: 
CHF 50.000; share Class I2 CHF: 
CHF 50.000.000; share Class X CHF: 
CHF 25.000.000; share Classes M3 
CHF, M4 CHF: CHF 25.000; share 
Classes A HKD, A2 HKD, I HKD, M 
HKD, M2 HKD: HKD 50.000; share 
Class I2 HKD: HKD 50.000.000; 
share Class X HKD: HKD 
25.000.000; share Classes M3 HKD, 
M4 HKD: HKD 25.000; share Classes 
A SGD, A2 SGD, I SGD, M SGD, M2 
SGD: SGD 50.000; share Class I2 
SGD: SGD 50.000.000; share Class X 
SGD: SGD 25.000.000; share Classes 
M3 SGD, M4 SGD: SGD 25.000; 

 
48  CSSF 

NEUBERGER 
BERMAN AIFM S.À 
R.L. 

49  CSSF 

AMUNDI ASSET 
MANAGEMENT SAS 

50  CSSF 

ADEPA ASSET 
MANAGEMENT S.A. 

NB ALTERNATIVE 
FUNDS SICAV S.A. - 
(sub-fund) NB 
DIRECT PRIVATE 
EQUITY FUND B 
ELTIF 

AMUNDI REAL 
ASSETS FUNDING 
S.C.A., SICAV-RAIF - 
(subfund) AMUNDI 
SENIOR IMPACT 
DEBT IV (ELTIF) 

THOMASLLOYD 
SICAV - (SUBFUND) 
SUSTAINABLE 
INFRASTRUCTURE 
GROWTH FUND 

LU 

Not marketed 
yet 

share Classes A EUR, I EUR, M EUR: 
EUR 125.000;  
share Classes A2 EUR, M2 EUR, X 
EUR: EUR 50.000.000;  
share Classes I2 EUR, M3 EUR, EUR 
25.000.000;  
share Class Z EUR: EUR 5.000.000 

LU 

AT, BE, DE, 
DK, ES, FI, 
FR, IT, LU, 
NL, NO, SE 

Targeted investors: institutional and 
professional investors only 
D1 = 1.000.0000 EUR 
D2 = 50.000.000 EUR 

LU 

Not yet 
marketed 

Class R = retail investors = min EUR 
10,000 
Class SP = all investors = min EUR 
200,000 
Class I = professional investors = no 
minimum  
The Sub-Fund will not be marketed to 
retail investors  
Class A = professional investors= 
125.000 EUR (waiver foreseen) 
Class B = well-informed investors 
who are also professional investors 
within the meaning of Annex II of the 
MIFID II = min commitments EUR 
500.000 (waiver foreseen) 
Class C = management company, the 
investment advisor, the investment 
manager, their affiliates = no  
minimum commitment 
H shares = institutional investors = 
min 5.000.000 EUR 
A shares = 1.000.000 EUR 
R shares = 10.000 EUR 
Classes A, B C = 10.000 EUR min 
Class D = carried interest vehicles 

Class R = 20.000 EUR min 
commitment  
Class I = 1.000.000 EUR min 
commitment 

Class I = 1.000.000 EUR min 
commitment 
Class L = professional investors/non-
EU resident eligible investors  = 
10.000.000 EUR min commitment 
Class J = professional investors/non-
EU resident eligible 
investors  =  25.000.000 EUR min 
commitment 
Class R = 20.000 EUR min 
commitment  
Class Z = institutional investors = no 
minimum 
Class S = specific employees of the 
manager or investment advisor who 
qualify as eligible investors = no 
minimum  
Eligible investors shall fulfil the 
eligibility criteria of the ELTIF 
Regulation. 

51  CSSF 

FONDACO LUX S.A.  THE BLOSSOM 

LU 

ELTIF - (subfund) 
THE BLOSSOM 
ELTIF II 

Not yet 
marketed 

52  CSSF 

MUZINICH & CO. 
(IRELAND) LIMITED 

MUZINICH TARGET 
LOANS 2025 ELTIF 
SICAV, S.A. 

LU 

IT 

53  CSSF 

54  CSSF 

55  CSSF 

AZIMUT 
INVESTMENTS S.A. 
(former AZ FUND 
MANAGEMENT 
S.A.) 
PICTET 
ALTERNATIVE 
ADVISORS 
(EUROPE) S.A. 

PICTET 
ALTERNATIVE 
ADVISORS 
(EUROPE) S.A. 

AZ ELTIF - (subfund) 
PRIVATE EQUITY 
HIGHPOST 

LU 

LU 

LU 

PICTET REAL 
ESTATE CAPITAL 
ELEVATION CORE 
PLUS ELTIF SICAV - 
(subfund) PD 
PICTET REAL 
ESTATE CAPITAL 
ELEVATION CORE 
PLUS ELTIF SICAV - 
(subfund) CK 

Not yet 
marketed 

Not yet 
marketed 

Not yet 
marketed 

110 

 
 
56  CSSF 

PICTET 
ALTERNATIVE 
ADVISORS 
(EUROPE) S.A. 

PICTET REAL 
ESTATE CAPITAL 
ELEVATION CORE 
PLUS ELTIF SICAV - 
(subfund) CD 

LU 

Not yet 
marketed 

57  CSSF 

PICTET 
ALTERNATIVE 
ADVISORS 
(EUROPE) S.A. 

PICTET REAL 
ESTATE CAPITAL 
ELEVATION CORE 
PLUS ELTIF SICAV - 
(SUBFUND) PK 

LU 

Not yet 
marketed 

Class I = 1.000.000 EUR min 
commitment 
Class L = professional investors/non-
EU resident eligible investors  = 
10.000.000 EUR min commitment 
Class J = professional investors/non-
EU resident eligible 
investors  =  25.000.000 EUR min 
commitment 
Class R = 20.000 EUR min 
commitment  
Class Z = institutional investors = no 
minimum 
Class S = specific employees of the 
manager or investment advisor who 
qualify as eligible investors = no 
minimum  
Eligible investors shall fulfil the 
eligibility criteria of the ELTIF 
Regulation. 
Class R = 20.000 EUR min 
commitment  
Class I = 1.000.000 EUR min 
commitment 

The information on applicable minimum investment amounts was partially provided by respective NCAs. In certain instances 
i) ELTIF managers have discretion to accept initial amounts that are lower than those set out in the marketing documents. In 
addition, the following observations apply: 
* The fund includes more than one share class and, for that fund, we have reported in the table the lowest entry ticket.  
** The ELTIF has been authorized but it has not marketed yet. 
***  Currently,  Luxembourg-based  ELTIFs  are  set  up  either  as:  SIFs  (specialised  investment  funds),  RAIFs  (reserved 
alternative investment funds) or UCI II (Non-UCITS). UCI II can be marketed to all types of investors. The UCI law does not 
impose a specific entry ticket. Consequently, for ELTIFs set up under the form of a UCI II, the minimum entry ticket of EUR 
10,000 set in the current ELTIF regulation applies but UCIs II are not prevented from imposing higher entry tickets. SIFs 
and  RAIFs  can  only  be  marketed  to  well-informed  investors,  in  which  case  a  minimum  of  EUR  125,000  investment 
requirement applies. 

111 

 
 
 
 
ANNEX 7: ANALYSIS OF FUND RULES NOT COVERED BY THE IMPACT ASSESSMENT  

1. 

Scope  of  eligible  investment  assets,  investments  and  qualifying  portfolio 
undertaking 

There  is  a  broad  consensus  among  stakeholders  that  the  ELTIF  rules  pertaining  to 
eligible assets and investments are not sufficiently flexible. Many stakeholders have been 
advocating  for  broadening  the  scope  of  eligible  investment  assets  and  investments  in  a 
manner that is both suitable for the optimal execution of investment strategies by ELTIF 
managers, as well as  consistent with  the underlying objectives of long-term sustainable 
growth. Most stakeholders have advocated for more legal certainty and flexibility around 
the facilitation of the funds-of-funds strategies, indirect investment strategies, criteria for 
investments in third-country undertakings, inclusion of “financial undertakings” and the 
calibration of certain numeric thresholds set out in the ELTIF regime. 

Each asset category has been considering through the prism of the merits and drawbacks 
and  assessing  whether  and  to  what  extend  the  broadening  of  eligible  assets  category 
serves  the interest  of improving the attractiveness of the ELTIF  framework.  The issues 
related to the eligibility of assets and investments have been analysed in conjunction with 
other ELTIF rules, such as diversification and concentration limits, leverage, etc. 

The  following  table  contains  an  outline  of  issues  to  be  addressed  in  the  area  of  the 
eligibility of assets and investments (this list is not exhaustive and is not in the order of 
policy priorities): 

Current ELTIF framework 

“real 

Definitions  of 
assets”, 
“long-term”,  “capital”,  “social 
benefit”,  “debt”,  “sustainable”, 
“energy,  regional  and  cohesion 
policies” 
“speculative 
and 
investments”, etc. 

Restrictions 
fund-of-funds 
on 
strategies,  whereby  only  ELTIFs, 
EuVECAs 
are 
eligible 

and  EuSEFs 

that 

requires 

Threshold 
that 
eligible  investment  assets  should 
include real assets with a value of 
more than EUR 10 million  

The  maximum  threshold  of  EUR 

Amendments to the ELTIF framework  
It is proposed to clarify the definitions of  “real assets”,  “long-term”, 
“capital”,  “social  benefit”,  “debt”,  “sustainable”,  “energy,  regional 
and  cohesion  policies”  and  “speculative  investments”  and  other 
related  notions.  Where  and  to  the  extent  sustainability  metrics  are 
used,  they  would  be  introduced  by  reference  to  Regulation  (EU) 
2020/852  (Taxonomy  Regulation),  including  defining  sustainability 
as  per  criteria  set  out  in  the  respective  Taxonomy  Regulation 
delegated acts. 

The  vast  majority  of  stakeholders  advocated  for  the  promotion  of 
fund-of-funds  investment  strategies  and  allowing  ELTIFs  to  invest 
beyond solely other ELTIFs, EuVECAs or EuSEFs in other funds. It 
is proposed to widen the scope of eligible fund-of-fund strategies and 
invest  beyond  ELTIFs,  EuVECAs  and  EuSEFs  provided  that  and  in 
so far as a) these funds invest in the same or similar asset universe as 
compared  to  ELTIFs  and  b)  similar  investment  restrictions  as  in  the 
case  of  ELTIFs  are  applied  in  terms  of  target  eligible  assets, 
diversification requirements, leverage limits, etc. This, among others, 
would  ensure  the  underlying  funds  have  the  same  risk  profile  as 
ELTIFs  and  not  expose  ELTIF  investors  to  undue  risks.  This 
amendment  would  also  extend  the  investment  base  and  offer  an 
exposure  to  a  wide  variety  of  assets  (Article  10  of  the  ELTIF 
Regulation). Respective safeguards  will be introduced to prevent the 
lack of transparency and an excessive layering of fees.  
It is proposed to reduce the amount of EUR 10 million in relation to 
the  investment  in  direct  or  indirect  holdings.  This  would  extend  the 
scope  of  eligible  investments  to  real  assets  with  a  lower  value,  and 
this  would  allow  to  take  into  account  the  different  sizes  of  national 
markets across Europe. 
It  is  proposed  to  raise  the  current  EUR  500  million  market 

112 

 
 
 
 
 
 
 
 
500  million 
the  market 
for 
capitalisation  of  listed  qualifying 
portfolio undertakings 

Requirement  that  the  qualifying 
portfolio 
a 
undertaking 
majority-owned subsidiary 
Indirect  investment  strategies  and 
“direct” 
the 
investments 

notions 

of 

is 

The  possibility  to  invest  in  a 
securitisation  under  the  ELTIF 
framework is unclear. 

There  is  a  lack  of  clarity  in  the 
ELTIF 
the 
treatment  of  investments  in  third-
country undertakings. 

around 

regime 

capitalisation threshold for listed issuers to EUR 1 billion. According 
to ESMA, an average market capitalisation of companies included in 
the  MSCI  Small  Cap  index  is  USD  1.2  billion.  In  addition,  it  is 
important  to  note  that  the  market  capitalisation  threshold  would  be 
applicable  solely  at  the  time  of  the  original  investment  without  the 
requirement  to  subsequently  divest  in  case  the  market  capitalisation 
changes as a result of price volatility or other circumstances. 
It is proposed to ease the requirement of “majority owned subsidiary” 
(Article  10(a)(iii)6)  of  the  ELTIF  Regulation  by  allowing  minority 
co-investments in investment opportunities. 
It  is  proposed  to  clarifying  the  legal  notions  around  the  eligible 
“indirect”  investments.  By  “indirect”  investments,  it  is  meant 
situations in which the ELTIF invests indirectly (via another entity as 
e.g.  SPVs,  securitisation  vehicles,  aggregator  vehicles,  holding 
vehicles)  into  the  relevant  eligible  target  assets,  which  are  essential 
for the facilitation of indirect investment strategies. 
It  is  proposed  to  enable  the  investments  in  the  so-called  “eligible 
securitisations”,  which  to  date  has  remained  either  questionable  or 
impossible due to the lack of clarity around the possibility to invest in 
securitised  assets.  It  is  intended  to  introduce  a  specific  set  of 
provisions  that  would  allow  to  include  the  so-called  “eligible 
securitisations” within the scope of eligible assets and investments. 
It is proposed to provide further qualitative guidance pertaining to the 
treatment  of  investments  in  third-country  undertakings.  Notably,  the 
extent to which investments in third countries (for all types of assets 
eligible  under  the  ELTIF  Regulation)  are  allowed  will  be  further 
clarified. 
third  country 
undertakings  would  further  broaden  the  scope  of  eligible  assets  and 
investments base, allow for new “thematic” investment strategies and 
generally  contribute  to  investment  possibilities  and  risk-adjusted 
returns  of  European  investors,  and  have  positive  externalities  on 
eligible  third-country  undertakings  and  long-term  project  owners. 
Investment in third-country undertakings  would  need conform to the 
existing eligibility conditions of the ELTIF Regulation. 

In  addition, 

investments 

in  eligible 

2. 

Assessment of portfolio composition, diversification  and concentration limit 
requirements 

Based on the analysis of relevant provisions of the ELTIF regime and the feedback of the 
respondents,  ELTIFs’  portfolio  composition  rules  would  need  to  be  streamlined. 
Adjusting  the  diversification  requirements  and  concentration  limits  would  provide 
additional  flexibility  for  ELTIF  managers,  while  providing  appropriate  level  of 
diversification in line with the risk-profile pursued investment strategies and the investor 
base. 

The limits of risk spreading in line with portfolio composition and diversification related 
thresholds  set  out  in  the  ELTIF  Regulation  implies  that  an  ELTIF  would  make,  as  a 
minimum, a total of 10 separate investments. This requirement to make a minimum of 10 
investments per ELTIF may prove difficult, costly and ultimately impractical to achieve 
due  to  the  costs  and  hurdles  to  identify,  analyse  and  select  10  distinct  projects,  which 
may  translate  into  additional  costs  and  complexity  for  the  execution  of  the  ELTIF 
investment strategy.114  

114  
As an illustration, the requirement of the ELTIF Regulation that ELTIFs shall invest no more than 10% of 
the capital in securities issued by, or loans granted to, any single qualifying portfolio undertaking, and no more than 
10% in a single real asset, and no more than 10% in any single ELTIF, EuVECA or EuSEF has been deemed to have 
an  effect  of  forcing  ELTIF  managers  to  be  diversified  to  the  detriment  of  the  asset  managers  and  ELTIFs,  and 
ultimately  to  the  detriment  of  all  investors  in  ELTIFs.  In  addition,  a  25%  concentration  limits  on  fund-of-funds 

113 

 
 
 
 
 
                                                           
It  is  hence  appropriate  to  revisit  the  portfolio  composition,  diversification  and 
concentration rules  for those ELTIFs  that  can be  marketed to  retail investors and those 
marketed  solely  to  professional  investors.  Stakeholders’  feedback  suggests  a  need  for 
more flexibility in terms of portfolio composition and diversification rules (whereas those 
ELTIFs  marketed  solely  to  professional  investors  would  arguably  require  even  less 
stringent  diversification requirements). As a result, the key policy choices pertaining to 
the  portfolio  composition,  diversification  rules  and  concentration  rules  could  be 
summarised as follows: 

Current ELTIF framework 
Requirement  to  invest  at  least 
70% of capital in eligible assets 

Prohibition  to  invest  more  than 
10%  of  capital  in  instruments 
issued  by,  or  loans  granted  to, 
any  single  qualifying  portfolio 
undertaking 
Prohibition  to  invest  more  than 
10%  of  its  capital  directly  or 
indirectly in a single real asset 

Prohibition  to  invest  more  than 
10%  of  its  capital  in  units  or 
shares  of  any  single  ELTIF, 
EuVECA or EuSEF 
Prohibition  to  invest  more  than 
5% of its capital in eligible assets 
where  those  assets  have  been 
issued by any single body 
The  aggregate  value  of  units  or 
shares  of  ELTIFs,  EuvECAs  and 
EuSEFs  in  an  ELTIF  portfolio 
shall  not  exceed  20  %  of  the 
value of the capital of the ELTIF 
The  aggregate  risk  exposure  to  a 
counterparty 
the  ELTIF 
of 
OTC 
stemming 
transactions,  repos,  or  reverse 
repo  shall  not  exceed  5%  of  the 
capital  
An  ELTIF  may  acquire  no  more 
than  25  %  of  the  units  or  shares 
of  a  single  ELTIF,  EuVECA,  or 
EuSEF 

from 

limits 

The  concentration 
laid 
down  in  the  UCITS  Directive 
(10%  exposure  to  a  single  issuer 
and  25%  limit  exposure  to  a 
UCITS) 
to 
investments in the ELTIF eligible 

apply 

shall 

Amendments to the ELTIF framework 
For those ELTIFs that are marketed solely to professional investors, it 
is proposed to reduce the threshold to 60% of capital to be invested in 
eligible assets. For ELTIFs that can be marketed to retail investors, this 
requirement would also be lowered to 60% 
For those ELTIFs that are marketed solely to professional investors, it 
is proposed to remove the 10% limitation. 
For  ELTIFs  that  can  be  marketed  to  retail  investors,  the  threshold 
would be re-calibrated to 20% of the ELTIF capital.  

For those ELTIFs that are marketed solely to professional investors, it 
is proposed to remove the 10% limitation. 
For  ELTIFs  that  can  be  marketed  to  retail  investors,  the  threshold 
would be re-calibrated to 20% of the ELTIF capital  
For those ELTIFs that are marketed solely to professional investors, it 
is proposed to remove the 10% limitation. 
For  ELTIFs  that  can  be  marketed  to  retail  investors,  the  threshold 
would be calibrated to 20% of the ELTIF capital 
For those ELTIFs that are marketed solely to professional investors, it 
is proposed to remove the 5% limitation. 
For  ELTIFs  that  can  be  marketed  to  retail  investors,  the  threshold 
would be re-calibrated to 10% of the ELTIF capital  
For those ELTIFs that are marketed solely to professional investors, it 
is proposed to remove the 20% limitation. 
For  ELTIFs  that  can  be  marketed  to  retail  investors,  the  threshold 
would be re-calibrated to 40% of the capital of the ELTIF 

For those ELTIFs that are marketed solely to professional investors, it 
is proposed to remove the 5% limitation. 
For  ELTIFs  that  can  be  marketed  to  retail  investors,  the  threshold 
would be re-calibrated to 10% of the capital of the ELTIF. 

For those ELTIFs that are marketed solely to professional investors, it 
is proposed to remove the 25% limitation. 
For  ELTIFs  that  can  be  marketed  to  retail  investors,  the  threshold 
would  be  increased  to  40%  of  the  capital.  Importantly,  the  scope 
broadened to include investments in EU AIFs managed by EU AIFMs 
in  so  far  as  the  funds  in  question  have  a  similar  risk,  asset  base, 
leverage and liquidity profile to that of ELTIFs. 
For those ELTIFs that are marketed solely to professional investors and 
for  ELTIFs  that  can  be  marketed  to  retail  investors,  it  is  proposed  to 
align  the  exposure  limits  to  ensure  the  coherence  with  the  proposed 
portfolio composition and diversification rules.  

strategies  and  UCITS-like  weighing  restrictions  for  ELTIF  eligible  assets  are  deemed  to  reduce  the  attractiveness  of 
ELTIFs, while driving up costs ultimately borne by all investors. 

114 

 
 
 
 
                                                                                                                                                                            
investments  

The  diversification  of  assets  and  portfolio  composition  rules,  and  concentration 
requirements,  should  always  be  analysed  in  conjunction  with  leverage  and  redemption 
requirements. The calibration of such fund rules  would require further examination and 
feedback of stakeholders, including  NCAs, ESMA, asset managers, investors and other 
market participants. 

3. 

Redemptions-related provisions 

3.1.  Effect of fund redemptions on redeeming and remaining investors  

The  fact  that  ELTIFs  redemptions  structure  resembles  that  of  closed-end  funds  which, 
except in very limited circumstances, only allow redemptions at the end of the life of the 
fund  does  not  in  itself  constitute  a  significant  problem.  This  fundamental  limitation  on 
redemptions  is  both  justified  by  the  illiquid  nature  of  the  assets  which  an  ELTIF  is 
invested  in  and  by  the  poor  visibility  into  the  fair  value  of  the  investments  on  a 
continuous  basis  (normally  the  fair  value  can  only  be  determined  at  the  time  of  the 
disinvestment).115  

ELTIF  managers  are  given  discretion  pertaining  to  the  availability  and  the  extent  of 
redemption  rights,  according  to  the  ELTIF's  investment  strategy.  When  a  redemption 
rights regime is in place, those rights and their main features are clearly predefined and 
explicitly disclosed in the rules or instruments of incorporation of the ELTIF.  

There  is  a  negative  sentiment  around  the  lock-up  for  a  relatively  long  period  of  time, 
which may  dis-incentivise investments  in  ELTIFs given concerns that the possibility  to 
exit from the ELTIF before the end of the life of the fund are very limited or rare. That is 
because, under the ELTIF Regulation redemption opportunities remain an exception and 
are only possible under narrowly construed exceptional circumstances (see Article 18(2) 
of the ELTIF Regulation).  

Specifically, some (predominantly retail) investors may be unwilling to commit capital to 
ELTIFs (or for that matter, investments with a long-term duration) without a possibility 
to redeem one’s investments within a short or medium-term or an exit from the ELTIF 
before the end of the life of the fund in order to meet certain financial objectives.  

The  ELTIF  Regulation  also  contains  a  provision  pertaining  to  secondary  market 
trading.116 The purpose of this provision is to ensure that the life cycle lock-up and the 
lack of redemption rights before the end of its life, do not prevent an ELTIF from seeking 
admission of its units or shares to a regulated market or to a multilateral trading facility, 
and provides investors with an opportunity to sell their units or shares before the end of 
the life of the ELTIF on the secondary market.117  

the  functioning  of 

ESMA  supports  this  approach  in  its  technical  advice.  See  ESMA  response  to  the  European  Commission 
the  ELTIF  regime.  ESMA34-46-99,  page  7.  Source: 
(27  April 

115  
dated  3  February  2021  on 
https://www.esma.europa.eu/press-news/esma-news/esma-provides-input-commission-improvements-eltif 
2021). 
116  
Article  19(1)  and  (2)  set  out  that  “the  rules  or instruments  of  incorporation  of  an  ELTIF  shall  not  prevent 
units or shares of the ELTIF from being admitted to trading on a regulated market or on a multilateral trading facility”. 
In addition, such “rules or instruments of incorporation of an ELTIF shall not prevent investors from freely transferring 
their units or shares to third parties other than the manager of the ELTIF”. 
117  
This is intended to promote secondary markets as an important venue for retail investors for the buying and 
selling  units  or  shares  of  ELTIFs.  In  practice,  such  secondary  trading  provisions  are  largely  unused  as  none  of  the 

115 

 
 
 
 
 
 
 
 
 
 
                                                           
Ultimately, the manager of the ELTIF could be given the discretion to decide whether to 
establish  ELTIFs  with  or  without  redemption  rights,  according  to  the  ELTIF’s  pre-
defined  investment  strategy.118  The  redemptions  regime,  as  well  as  the  rights  and 
obligations  of  the  redeeming  investors  and  the  main  features  and  requirements  of 
redemptions  should  be  clearly  defined  and  disclosed  in  the  rules  or  instruments  of 
incorporation  of  the  ELTIF.  Typically,  such  requirements  are  also  disclosed  in  the 
prospectus.  

3.2.  Optional redemptions mechanism 

There may be a risk that investors are misinformed about the lack of redemption rights 
when  investing  in  a  fund,  or  where  secondary  markets  made  available  for  selling 
investments turn out to be themselves illiquid, for instance where there is a run on a fund 
and there are many more sellers than buyers in the secondary market leading to spreads 
in the secondary market widening significantly. There may also be a risk that distributors 
sell  investments  on  the  basis  that  the  distributor  themselves  will  provide  liquidity  (at  a 
price)  for  those  wishing  to  redeem  their  holdings,  yet  the  scale  of  redemption  requests 
leaves  the  distributor  unable  to  support  the  requests.  Another  problem  can  be  that  the 
maturity of funds might  be extended in  an unanticipated way and investors cannot  exit 
the fund.  

Open-ended funds,  which offer  regular  redemption  possibilities and which normally do 
not  have  a  finite  life,  can  also  be  used  in  some cases  for  investing  in  long-term  assets. 
These funds tend to be popular in the property market. There is a risk that the liquidity of 
the  assets  would  be  too  low  to  support  the  redemption  rights  offered  to  investors  on  a 
regular basis. Since the secondary market for the assets is not guaranteed and may freeze, 
the fund might be confronted with situations where it needs to suspend redemptions for 
an indeterminate period of time. Investors would then be forced to remain invested even 
where they formed the appropriate expectation – given the fund is open-ended - that they 
would be able to redeem. 

In terms of redemptions, ELTIFs are essentially closed-end funds, except for very limited 
exceptions. This fundamental rule of the lock-up during the life of a fund is justified by 
the illiquid nature of the ELTIF underlying assets. The close-end nature of ELTIFs has 
provoked criticism. Notably, a large number of stakeholders have advocated for a more 
readily  redeemable  ELTIF  structure  that  would  provide  for  regular  (say,  bi-annual  or 
quarterly) redemptions or even a so-called “evergreen” redemption structure that would 
make ELTIFs redeemable at any time. Essentially, these stakeholders are advocating for 
the possibility to exit from the ELTIF before the end of the life of the fund in order to 
address the concern that retail investors may wish to redeem before the maturity of the 
fund. 

existing ELTIFs has ever been publicly listed. Based on feedback of the industry participants, whilst the public listing 
on  a  trading  venue  remains  a  theoretical  possibility,  the  costs  of  listing,  admission  to  trading  and  compliance 
requirements are often prohibitively expensive, especially given a moderate size of the majority of authorised ELTIFs. 
This  reduces  the  effectiveness  of  secondary  trading  as  a  means  of  providing  for  early  redemption  and  necessitates 
examining other options. 
118  
It could be appropriate to envisage that such a fund could opt in for this liquidity set-up once its respective 
supervisor has been provided evidence that the fund’s management strategy, assets type, liquidity management tools, 
result  of  conservative  stress  tests  and  other  circumstances  provide  convincing  evidence  that  such  early  redemption 
rights in re-defined circumstances do not result in adverse consequences or risks for the fund, AIFM or investors. 

116 

 
 
 
 
 
 
 
 
                                                                                                                                                                            
Calls by some industry  participants  for  regular redemptions  fails to  take account  of the 
balance  of  interests  between  those  investors  that  wish  to  redeem  and  those  that  are 
maintaining  their  investment  in  the  fund.  Readily  available  redemptions  come,  as 
explained below, at a high cost and are often to the detriment of exiting investors, asset 
managers  and  even  remaining  non-redeeming  investors.  The  practical  impossibility  to 
redeem has been actually praised by some asset managers that were consulted as part of 
the  review  as  it  allows  ELTIFs’  ability  to  withstand  increased  market  volatility  and 
cycles  while  allowing  sufficient  time  for  the  manager  to  execute  their  investment 
strategy. 

Stakeholders  feedback,  and  policy  work,  as  well  as  specific  inputs  by  some  national 
regulators  have  allowed  to  explore  the  development  of  a  secondary  market  for  ELTIFs 
and  the  consideration  of  the  regulatory  merits  of  a  “liquidity  window”  mechanism  to 
allow potential investors to express an open interest that can be submitted after at least 
one year of the operation of the fund and with a one month advance notice to subscribe 
for  the  units  of  an  ELTIF.  Such  open  interest  and  possible  subscription  would  only  be 
permitted in so far as and to the extent of a matching corresponding interest in redeeming 
the existing investors’ units in an ELTIF.  

The  revised  ELTIF  regime  would  provide  for  more  details  for  the  mechanism  and 
process  of  matching  subscription  requests  with  the  transfer  requests  by  exiting 
(redeeming)  investors,  execution  price,  disclosure  requirements,  possible  pro-ration 
conditions, time period during which the liquidity windows be available and the handling 
of  pay-outs.  In  terms  of  subscriptions,  there  will  be  an  option  to  open  the  fund  for 
subscriptions  and  redemptions  periodically,  when  the  NAV  is  published,  subject  to  a 
notice period. These subscription requests will fund requests from exiting investors and, 
if the total amount of new subscriptions is insufficient to meet or exceeds the volume of 
redemption requests, the matching mechanism would adjust respective amounts on a pro-
rata basis. Any such transfers would not come at the cost of the remaining investors of 
the fund (i.e. where an asset manager would have to liquidate assets or tap into the cash 
and  cash  equivalents  on  the  balance  sheet,  or  borrow  cash  at  expense  of  the  remaining 
investors), but only to the extent of the funds raised from the new subscribing investors.  

The  mechanics  of  the  matching  of  subscription  and  exit  requests,  the  timing  window, 
disclosure  requirements  and  the  mechanics  of  the  pro-ration,  as  well  as  the  valuation 
methods would need to be streamlined, in consultations with ESMA, with a view to their 
practical implementation. In terms of valuation, the quarterly NAV publication would be 
a good valuation proxy but can ultimately diverge from the underlying intrinsic NAV at 
the time of redemptions.119 

The  advantage  of  this  approach  is  that  it  would  allow  redeeming  investors  to  fully  or 
partially exit from an ELTIF, albeit with no guarantee of doing so, while protecting the 
interests of the remaining investors. 

4. 

Other ELTIF fund rules 

119  
Since the liquidity window mechanism would be designed as a purely optional arrangement at the inception 
of an ELTIF and solely at the discretion of the asset manager, it would likely be introduced only in so far as such a 
redemption is overall deemed beneficial by the asset manager, say, via an increased inflows of funds or higher quality 
of investee companies/assets/project owners attracted by a higher liquidity profile of such an ELTIF. As a result, such 
benefits would be deemed to outweigh additional costs and administrative burdens associated with the offering of and 
servicing such a redemptions mechanism. 

117 

 
 
 
 
 
 
 
 
                                                           
The  ELTIF  review  has  identified  the  following  aspects  that  will  require  amendments, 
streamlining and re-calibration: 

Current ELTIF framework 
Authorisation process: Article 
5(2) of the ELTIF Regulation 
requires that the competent 
authority of the ELTIF shall give 
an approval to the EU authorised 
AIFM who intends to manage the 
ELTIF. 
Conflicts of interest: Article 12 
of ELTIF Regulation foresees 
that an ELTIF shall not invest in 
an eligible investment asset in 
which the manager of the ELTIF 
has or takes a direct or indirect 
interest, other than by holding 
units or shares of the ELTIFs, 
EuSEFs or EuVECAs that it 
manages. 

Disposal of ELTIF assets: 
Article 21(1) of the ELTIF 
Regulation indicates that the 
ELTIF shall disclose to the 
competent authority the schedule 
for the orderly disposal of its 
assets in order to redeem 
investors' units or shares after the 
end of the life of the ELTIF. 
Local physical presence: Article 
26 of the ELTIF Regulation 
indicates that ELTIF managers 
are required to set up local 
facilities in each Member State 
where they intend to market 
ELTIFs.  

Withdrawal period: ELTIF 
regime allows a two-weeks 
period for retail investors to pull 
out their investments 

Amendments to the ELTIF framework 
According  to  ESMA’s  technical  advice,  the  extent  to  which  this 
additional  authorisation,  that  supplements  the  authorisation  granted 
under  the  AIFMD,  is  needed  and  useful  may  be  unclear  and  may 
create  confusion  as  regards  the  responsibilities  of  the  two  different 
competent authorities involved.  It is therefore proposed to streamline 
these requirements. 

The application of certain conflicts of interest related provision of the 
ELTIF  Regulation  raises  doubts  concerning  the  conditions  under 
which ELTIF managers, and their affiliated entities (for instance, asset 
managers  that  belong  to  the  same  group  with  the  ELTIF  manager), 
and  their  staff  may  invest  in  ELTIFs.  Such  a  practice  is  a 
commonplace  in  many  situations,  where  the  co-investment  is  a 
standard requirement and is an integral part of the asset management 
mandate. It is hence proposed to clarify the requirements by aligning 
them  to those set out in the EuVECA and EuSEF  regimes  which  are 
based  on  the  principle  of  identifying  and  avoiding  conflicts  of 
interests.  Currently,  the  prohibition  laid  down  in  Article  12  of  the 
ELTIF  Regulation  are  overly  restrictive  and  require  better  alignment 
with  Recitals of the ELTIF Regulation and  Article 14 of the AIFMD 
(e.g. if the requirements of Article 12 imply that an ELTIF and an AIF 
managed  by  the  same  EU  AIFM  cannot  co-invest  alongside  with 
similar  terms  and  conditions  in  the  same  assets,  this  would  in 
particular prevent an investment in the same assets from being a tool 
aiming  at  aligning  interest  between  the  manager  and  its  funds). 
Therefore, it is proposed to clarify the treatment of such co-investment 
strategies, both at a level of the fund and to enable certain cases where 
portfolio  managers,  entities  that  belong  to  the  same  group  with  the 
ELTIF  manager  and  their  staff  (normally  portfolio  managers  and 
senior staff) can co-invest in a fund and/or in the same asset in which 
ELTIFs invest by virtue of their investment mandate.  
This  rule  has  been  cited  as  burdensome  for  the  ELTIF  manager  and 
might  not  always  be  fully  useful  or  informative  for  the  competent 
authority.  It  is  therefore  proposed  to  clarify  that  this  disclosure  is 
required  once  requested  by  the  competent  authority  to  obtain  the 
schedule  for  the  orderly  disposal  of  the  assets  and  to  ensure  an 
adequate execution of the supervisory activities by national competent 
authorities. 

This  requirement  has  been  recently  removed  by  Directive  (EU) 
2019/1160 of the European Parliament and of the Council of 20 June 
2019 amending Directives 2009/65/EC and 2011/61/EU with regard to 
cross-border  distribution  of  collective 
investment  undertaking 
(regarding  UCITS  and  AIFs  marketed  to  retail  investors)  as  it  was 
deemed to create additional costs and the preferred method of contact 
has shifted to direct interaction between investors and fund managers 
(electronically  or  by  telephone).  It  is  proposed  to  remove  this 
obligation from the ELTIF Regulation for all ELTIF investors so as to 
increase the attractiveness of ELTIFs. 
Investments  in  non-listed  companies  are  difficult  to  reverse  and  the 
costs to disinvest could be high for retail investors and detrimental for 
remaining ELTIF investors. Once the commitment  period has lapsed, 
it  should  no  longer  be  possible  for  retail  investors  to  withdraw  their 
investments.  It  is  therefore  proposed  to  clarify  that  the  two-weeks 
withdrawal period is maintained  but solely  until the fund is closed to 
subscriptions. 

118 

 
 
 
Leverage restrictions: current 
borrowing of cash restrictions are 
30% 

Borrowing of cash hedging 
limitation: only euros or the base 
currency are an eligible currency 

Master-feeder structure: 
Currently, the ELTIF regime 
contains no provisions 
authorising master-feeder 
structure 

to 

take 

the  asset  manager 

the  requirement  of 

Leverage  is  a  key  element  of  long-term  projects  financing.  For 
ELTIFs  to  be  a  credible  source  of  funding  for  these  projects,  it  is 
important  to  re-calibrate  leverage  limitations  in  light  of  the  reduced 
stability  risks  stemming  from  these  funds:  they  are  closed-end  AIFs 
with  strong  diversification  rules.  According  to  prevailing  market 
practices,  real  estate  AIFs  leverage  ranges  usually  between  100  to 
200%;  in  addition,  there  is  a  growing  importance  of  providing 
profitable products for both professional investors and retail investors. 
Furthermore,  under 
the  AIFMD  regulatory  framework,  NCAs 
supervise  leverage  and  may  impose  additional  limits  as  part  of  their 
ongoing  monitoring.  Finally,  it  is  necessary  to  ensure  a  consistent 
approach among AIFs (ELTIFs are AIFs with very restricted leverage, 
which is not consistent with the AIFMD approach). 
Furthermore, according to ESMA “If it is considered relevant to create 
a  specific  type  of  ELTIFs  for  professional  investors  only,  these 
ELTIFs  could  benefit  e.g.  from  a  higher  level  of  leverage….”  These 
views were also shared broadly by some industry participants. 
Against  this  background,  leverage  restrictions  will  be  eased.  ELTIFs 
that  are  structured  only  for  professional  investors  will  benefit  from 
substantial  flexibility.  These  changes  have  also  been  strongly 
advocated  by  the  asset  management  industry  and  specifically  by  the 
High-Level Forum on the CMU in its recommendations. Importantly, 
as per the existing  AIFMD requirements, potential risks arising  from 
the  use  of  leverage  should  be  addressed  by  managing  leverage 
appropriately with respect to the investment and any potential maturity 
or  currency  mismatches  in  the  portfolio.  It  would  be,  as  per  the 
AIFMD, 
into 
consideration  the  potential  risks  that  high  leverage  could  pose, 
including  to  financial  stability,  as  per  the  applicable  AIFMD 
provisions. 
Further, ELTIFs which can be marketed to retail investors will also be 
eligible to have a higher level of leverage than the current 30% of the 
capital  of  ELTIFs  in  the  light  of  the  market  practice  and  reduced 
stability  risks  (ELTIFs  are  closed-ended  long-term  funds),  as  well  as 
the  need to provide for a better risk-adjusted performance  possibility 
and  ensuring  equal  opportunities  of  retail  investors  compared  to 
professional  investors.  The  current  leverage  of  30%  effectively 
excludes  retail  ELTIFs  from  investment  opportunities.  Without  the 
change,  there  will  be  a  gap  between  retail  and  non-retail  AIFs 
performances.  This  would  reduce  the  chance  of  creating  a  sizeable 
European market to finance long-term projects.  
The range of the leverage increase will ultimately be calibrated based 
on the input by ESMA. 
The  condition  that  presently  allows  borrowing  only  in  the  same 
currency as the assets which will be acquired with the borrowed cash 
is not the most efficient approach, as an ELTIF could borrow at more 
convenient  rates  in  currencies  that  are  not  the  base  currency  of  the 
asset, provided that foreign currency exposures are adequately hedged. 
It  is  therefore  proposed  to  delete  the  borrowing  in  the  base  currency 
requirement  provided  that  respective  hedging  techniques  are  put  in 
place  or  where  it  could  be  demonstrated  that  borrowing  in  another 
currency does not give rise to undue risks. 
The ELTIF regime will enable the master-feeder structure based on an 
ELTIF  feeder,  below  an  AIF  master  type.  This  structure  will  grant  a 
broader  flexibility  to  ELTIFs  and  would  allow  to  set  up  an 
infrastructure  fund  in  one  Member  State,  marketed  mainly  to  one 
category  of  institutional  investors,  with  a  feeder  fund  in  another 
Member State. The feeder fund would be used to attract international 
investors that are keener to invest in a feeder fund, allowing for more 
flexibility.  Safeguards  will  be  introduced  to  ensure  due  protection  of 
investors. 

119 

 
 
ELTIF Register: Currently the 
constitution of the ELTIF register 
by ESMA is based on self-
reporting by the NCAs which has 
exposed a number of 
transparency problems and 
inefficiencies 

ELTIF  Regulation’s  provisions  regarding  the  ELTIF  register  will 
mandate  that  updates  to  the  register  are  carried  out  with  higher 
frequency,  transparency  and  more  granularity.  This  will  ensure  more 
transparency and higher visibility of the ELTIF regime. 

120