REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the functioning of the European long-term investment funds (ELTIF) framework
Date: 2021-11-25
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: EU investment, European Investment Fund, economic growth, investment company, investment policy, long-term financing

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 25.11.2021  COM(2021) 738 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the functioning of the European long-term investment funds (ELTIF) framework  
 
 
TABLE OF CONTENTS 

1.  BACKGROUND ................................................................................................................................. 2 

2.  FUNCTIONING OF THE ELTIF FRAMEWORK: EVALUATION ............................................................. 3 

3.  REDEMPTIONS-RELATED PROVISIONS AND LIFE-CYCLE OF ELTIFS ............................................... 4 

4.  MINIMUM THRESHOLD FOR ELIGIBLE INVESTMENT ASSETS ........................................................... 5 

5.  MARKETING OF ELTIFS BY SUB-THRESHOLD AIF MANAGERS ...................................................... 6 

6.  ELIGIBLE ASSETS AND INVESTMENTS ............................................................................................. 6 

7.  DIVERSIFICATION AND PORTFOLIO COMPOSITION RULES ............................................................... 7 

8.  BORROWING OF CASH ..................................................................................................................... 8 

9.   CONCLUSIONS ................................................................................................................................. 8 

1 

 
 
 
 
 
 
 
1. 

BACKGROUND 

Regulation  (EU)  2015/760  on  European 
investment  funds  (the  ‘ELTIF 
Regulation’)1  establishes  a European  regulatory  framework  for alternative  investment  funds 
(AIFs)  that  invest  in  long-term  projects.  Their  goal  is  to  raise  and  channel  capital  towards 
European  long-term  investments  in  the  real  economy  and  promote  the  Union  objective  of 
smart, sustainable and inclusive growth. 

long-term 

ELTIFs  invest  in  a  broad  range  of  projects,  such  as  social  and  transport  infrastructure,  real 
assets  and  small  and  medium-sized  enterprises  (SMEs).  ELTIFs  are  intended  to  facilitate 
long-term  investments  and  provide  an  alternative,  non-bank  source  of  finance  to  the  real 
economy.  In  June  2020,  the  High  Level  Forum  on  the  Capital  Markets  Union  (CMU) 
published a report2 recommending a targeted review of ELTIFs to improve their low uptake 
by the market and increase the flow of long-term financing3.  

The  revised  CMU  action  plan4  recognises  the  need  to  support  the  financing  of  long-term 
investment projects and the participation of retail investors. The Commission also committed 
to review the ELTIF Regulation5. This review has strong links with the CMU, the European 
Green  Deal6,  the  European  Energy  Union7,  the  sustainable  finance  strategy  and  other 
important EU initiatives8. On 2 December 2020, the Council of the European Union called on 
the Commission to review the ELTIF Regulation9. 

The requirement to review the functioning of the ELTIF  regulatory framework is set out in 
Article 37  of  the  ELTIF  Regulation  which  requires  that  the  review  analyses  redemption 
policies, asset diversification requirements, the extent to which ELTIFs are marketed in the 
Union and whether the list of eligible assets and investments should be updated10. 

1  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). 
2 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  
3 Ibid, page 12. 
4  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 
5 Ibid, page 8 (Action 3). 
6 A European Green Deal. Source: https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en  
7 Energy Union Strategy. Source: https://ec.europa.eu/energy/topics/energy-strategy/energy-union_en 
8 Notably, the review of the ELTIF framework  would contribute to the  EU agenda on Sustainable Finance by channelling 
financing to respective long-term projects, including the potential to promote the sustainability objectives of the Regulation 
(EU) 2020/852 on the establishment of a framework to facilitate sustainable investment (EU Taxonomy Regulation;  OJ L 
198, 22.6.2020, p. 13). 
9  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.  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 
10Article  37(2)  of  the  ELTIF  Regulation  sets  out  that  “following  the  review  […],  and  after  consulting  ESMA,  the 
Commission  shall  submit  to  the  European  Parliament  and  to  the  Council  a  report  assessing  the  contribution  of  this 
Regulation and of ELTIFs to the completion of the Capital Markets Union and to the achievement of the objectives set out in 
Article 1(2). The report shall be accompanied, where appropriate, by a legislative proposal.” 

2 

 
 
 
 
 
 
 
                                                           
This  report draws upon  technical  advice by the  European Securities and Markets  Authority 
(ESMA)11, desk research and stakeholder feedback from the public consultation. It identifies 
a number of barriers to market growth as well as other issues relevant to the functioning of 
the ELTIF framework12. The report seeks to inform the European Parliament and the Council 
of the European Union of the key areas of the review and shortly present its key findings13.  

In the context of the ELTIF framework review, this report summarises the key findings of the 
evaluation of the regulatory framework’s operation. 

2. 

FUNCTIONING OF THE ELTIF FRAMEWORK: EVALUATION 

As  of  October  2021,  only around  57  ELTIFs,  with  approximately  EUR  2.4  billion  in  net 
assets  under  management,  had  been  authorised  to  operate.  The  reported  ELTIFs  were 
domiciled in only four Member states (France, Luxembourg, Italy and Spain).  According to 
the  information  compiled  by  ESMA,  the  total  size  of  the  ELTIF  market  has  grown  from 
slightly  above  EUR  1.5  billion  in  2020  to  around  EUR 2.4  billion  in  2021.  Despite  this 
relative growth, when compared to the overall size of the EU AIF market of around EUR 6.8 
trillion, ELTIFs remain a very small segment of this14.  

The  low  number  of  ELTIFs,  their  low  net  assets,  geographic  concentration  and  portfolio 
composition  indicate  that  the  ELTIF  industry  is  underdeveloped.  As  a  result,  the  ELTIF 
framework has not realised its full potential in terms of size (in particular, in terms of assets 
under management  and the number of  funds)  and scope  (e.g. range of eligible projects  and 
investments)15.  ELTIFs  have  not  achieved  mainstream  market  appeal  or  fulfilled  their 
potential to channel capital financing to long-term investments.  

2.1.   Demand-side restrictions  

The  key  demand-side  problem  drivers  are  the  rules  that  impose  restrictions  and  make  it 
difficult  for  investors  to  invest  in  ELTIFs.  The  current  rules  seem  to  create  unnecessary 
barriers  preventing  retail  investors  from  entering  the  market.  For  example,  the  obligation 
under the ELTIF Regulation that the asset manager has to assess a retail investor's knowledge 
and experience partially duplicates the suitability assessment under Directive 2014/65/EU on 
markets in financial instruments (MiFID II)16.  

Furthermore,  as  outlined  in  the  impact  assessment,  the  minimum  initial  investment  of 
EUR 10 000  and  the  10%  limitation  on  aggregate  investment  for  investors  with  a  financial 

11  See  ESMA  response  to  the  European  Commission  of  3  February  2021  on  the  functioning  of  the  ELTIF  regulatory 
framework. ESMA34-46-99. Source: https://www.esma.europa.eu/press-news/esma-news/esma-provides-input-commission-
improvements-eltif  
12  Notably,  see  the  analysis  of  the  redemption  policy  and  life  of  ELTIFs  in  Section  3,  asset  diversification  in  Section  4, 
certain aspects of the marketing of ELTIFs in Section 5, the eligibility of assets and investments in Section 6, diversification 
and portfolio composition in Section 7, and provisions on the borrowing of cash in Section 8. 
13 To that end, Section 2 to 7 summarise the evaluation of the ELTIF framework, redemptions-related provisions and life-
cycle  of  ELTIFs,  minimum  threshold  for  eligible  investment  assets,  marketing  of  ELTIFs  by  sub-threshold  AIF  mangers, 
eligible assets and investments, diversification and portfolio composition rules and borrowing of cash provisions.  
14ESMA 
6. 
https://www.esma.europa.eu/document/eu-alternative-investment-funds-2021-statistical-report (7 June 2021).  
15  All  funds  were  domiciled  in  only  four  Member  States  (Luxembourg,  France,  Italy  and  Spain),  while  none  of  the  other 
Member 
Source: 
https://www.esma.europa.eu/document/register-authorised-european-long-term-investment-funds-eltifs  
16 OJ L 173, 12.6.2014, p. 349, as amended.  

of  Authorised  ELTIFs.  ESMA34-46-101. 

domestic  ELTIFs.  Register 

Alternative 

Investment 

Statistical 

Source: 

Report 

Funds, 

States 

2021. 

page 

had 

EU 

3 

 
 
 
 
 
 
 
 
 
                                                           
portfolio  below  EUR 500 000  constitute  a  significant  barrier  for  retail  investors17.  Even 
where an investor wishes to invest EUR 10 000 in a single ELTIF, investing in other ELTIFs 
and  diversifying  their  long-term  portfolio  could  prove  difficult,  given  the  10%  aggregate 
threshold  requirement18.  In  addition,  both  the  EUR 500 000  and  10%  exposure  figures  are 
based  on  self-reporting  by  retail  investors,  and  asset  managers  or  distributors  are  unable  to 
independently verify the true exposures by retail investors. 

2.2.   Supply-side restrictions 

The key supply-side problem drivers of the ELTIF framework consist of restrictive fund rules 
that  limit  the  available  investment  universe,  fund  structures  and  investment  strategies  and 
make it less attractive for asset managers to set up ELTIFs.  

The  current  ELTIF  fund  rules  contain  certain  provisions  that  appear  to  be  preventing 
managers from pursuing a wider range of investment strategies. Making it easier for them to 
do  so  could  help  channel  more  financing  into  long-term  investment  projects.  These 
provisions  therefore  seem  to  be  impairing  the  functioning  of  the  ELTIFs  and  making  them 
less attractive for the investment manager than other competing fund structures. As a result, 
when  choosing  the  ELTIF  label  for  an  investment  vehicle,  all  AIFMs  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.  

In this context, ESMA’s technical advice to the Commission of 3 February 2021 recognised 
the  underlying  conflict  of  the  ELTIF  framework  in  trying  to  serve  the  needs  of  both 
professional and retail investors with a single rulebook. ESMA went on to recommend rules 
that  more  explicitly  differentiate  between  ELTIFs  marketed  solely  to  professional  investors 
and ELTIFs marketed to retail investors.  

The  evaluation  of  the  ELTIF  framework  established  that  the  same  fund  rules  for  both 
professional and retail investors are unable to meet the specific demands of two very distinct 
categories of investors with different time horizons, risk tolerance and investment needs and 
may be seen as preventing managers from offering tailored products19.  

3. 

REDEMPTIONS-RELATED PROVISIONS AND LIFE-CYCLE OF ELTIFS 

ELTIF redemption policies are set out in Article 18 of the Regulation. The default fund rule 
is  that  investors  in  an  ELTIF  may  not  redeem  their  units  or  shares  before  the  end  of  the 
ELTIF’s life. To that end, the standard rule of the ELTIF legal framework in this area is that 
investors in an ELTIF would not be able to redeem their units or shares before the end of the 
ELTIF’s life.  

17  The  10%  threshold  is  applied  on  an  aggregate  level.  This  means  that  the  total  (aggregate)  amount  allocated  by  retail 
investors to any ELTIFs should not exceed 10% of the investor’s portfolio in ELTIFs. 
18 One could envisage a scenario where a retail investor with a financial portfolio of EUR 180 000 has acquired EUR 10 000 
worth of shares or units of an ELTIF. Such an investor would be prevented by the current ELTIF rules from purchasing any 
other ELTIFs. That is because the investor may, in aggregate, purchase EUR 18 000 or 10% of its total portfolio of ELTIFs. 
However,  by  purchasing  the  first  ELTIF,  the  investor  would  be  prevented  from  allocating  the  remaining  EUR 8 000  to 
purchasing another ELTIF due to the EUR 10 000 minimum investment ticket requirement. 
19  In  addition,  the  participation  of  retail  investors  in  an  ELTIF  may  lead  to  higher  administrative  burdens  and  associated 
costs for marketing ELTIFs to retail investors compared to ELTIFs solely  marketed to professional investors. While these 
burdens may appear to be administrative in practice (a requirement  for a key information  document, a 2-week withdrawal 
right  without  a  penalty,  extra  procedures  and  staff  to  deal  with  any  complaints  by  retail  investors,  etc.),  the  respective 
provisions were deemed to make ELTIFs solely marketed to professional investors less attractive.  

4 

 
 
 
 
 
 
 
 
 
                                                           
Asset managers can insert derogations (typically in rules or instruments of incorporation) and 
provide  for  possible  redemptions  before  the  end  of  the  ELTIF’s  life.  However,  such 
redemptions are rather an exception and only allowed if strict conditions are met20. 

A  significant  number  of  stakeholders  raised  the  issue  of  investors  not  being  allowed  to 
redeem their fund before its end date. The stakeholders saw this as a potential weakness of 
the  ELTIF  framework  and  noted  that  it  could  be  a  constraint  for  investors.  They  called  for 
more  flexibility  to  allow  early  redemption  during  the  life-cycle  of  an  ELTIF  to  make  the 
ELTIF more attractive as an investment vehicle.  

However,  the  redemptions  structure  for  ELTIFs  resembles  that  of  closed-end  funds  which, 
except  in  limited  circumstances,  only  allow  redemptions  at  the  end  of  the  fund’s  life.  This 
limitation on redemptions is 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.  

The ELTIF Regulation also contains a provision on secondary market trading21. The purpose 
is to ensure that the life cycle lock-up and the lack of redemption rights before the end of the 
fund’s  life  do  not  prevent  an  ELTIF  from  seeking  admission  of  its  units  or  shares  to  a 
regulated market  or to  a multilateral  trading facility. The provision  also  allows investors to 
sell their units or shares before the end of the ELTIF’s life on the secondary market.  

Against this background, the provisions of the ELTIF Regulation contain a basis for allowing 
fund managers greater discretion in deciding to establish ELTIFs with or without redemption 
rights, according to the ELTIF’s pre-defined investment strategy. Such investment strategies 
could also capitalise on the ELTIF provisions enabling secondary trading of shares or units of 
ELTIFs,  such  as  the  liquidity  window  mechanism  matching  subscription  requests  by  new 
investors and redemption requests of exiting ELTIF investors. 

4. 

MINIMUM THRESHOLD FOR ELIGIBLE INVESTMENT ASSETS  

Article 13(1) of the ELTIF Regulation stipulates that an ELTIF should invest at least 70% of 
its capital in eligible investment assets. This threshold was put in place to ensure a clear focus 
on  long-term  investments  and  to  ensure  a  continuous  focus  on  retail  investors  who  may 
otherwise be unfamiliar with less conventional investment strategies. 

Some stakeholders regarded the 70% threshold as excessively high. Lowering the threshold 
would,  in  the  view  of  many  stakeholders,  allow  ELTIFs  to  pursue  more  differentiated 
investment strategies.  

20 See Article 18(2) of the ELTIF Regulation. To that end, ESMA is vested with the requirement to develop draft regulatory 
technical standards specifying the circumstances in which the life of an ELTIF is considered sufficiently long to cover the 
life-cycle of each of the ELTIF’s individual assets.  
21 Article 19(1) and (2) state 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’. 

5 

 
 
 
 
 
 
 
 
 
 
 
 
                                                           
 
A minority of stakeholders considered the current eligible assets threshold to be appropriate. 
In their view, the objective of the ELTIF framework is to promote long-term investment and 
to focus on illiquid assets.  

In this context, serious considerations should be given to the appropriateness of lowering and 
calibrating  minimum  thresholds  for  eligible  investments  in  ELTIFs  in  order  to  promote  the 
liquidity profile of ELTIFs and increase the flexibility of ELTIF managers in executing their 
investment strategies.  

5. 

MARKETING OF ELTIFS BY SUB-THRESHOLD AIF MANAGERS 

Article  37(1)(c)  of  the  ELTIF  Regulation  requires  the  Commission  to  assess  the  extent  to 
which ELTIFs are marketed in the Union, including whether the sub-threshold AIF managers 
(AIFMs)  falling  under  Article  3(2)  of  the  AIFMD  might  have  an  interest  in  marketing 
ELTIFs.  

Several stakeholders were of the view that the ELTIF regulatory framework is unlikely to be 
appropriate  for  sub-threshold  AIFMs.  Such  stakeholders  supported  their  view,  citing  the 
complexity and operational  requirements, including investor protection  concerns, as  well as 
the fact that it would require AIFMs to comply with full AIFMD requirements, which could 
prove to be too onerous for these managers.  

Some  stakeholders  expressed  the  view  that  the  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  AIFMs  below  these  thresholds  would  pose  significant  problems  for  a 
level playing field and pave the way for regulatory arbitrage. In these stakeholders’ opinion, 
facilitating  the  marketing  of  ELTIFs  by  AIFMs  falling  under  Article  3(2)  of  the  AIFMD 
should not at all be the priority.  

6. 

ELIGIBLE ASSETS AND INVESTMENTS  

The ELTIF rules on eligible assets and investments set out clear categories of assets that are 
eligible for investment by ELTIFs to ensure that funds do not engage in financial transactions 
that might give rise to risks that are greater than might be expected for a fund targeting long-
term investments. 

Furthermore,  the  provisions  of  the  ELTIF  Regulation  provide  a  clear  focus  on  long-term 
investments and define a set of conditions and limitations that prevent ELTIFs from engaging 
in  investment  strategies  that  would  not  be  qualified  as  purely  ‘long-term’,  such  as  the 
prohibition to invest in financial derivative instruments other than for the purpose of hedging, 
the  prohibition  to  invest  in  ‘financial  undertakings’,  the  exclusion  of  commodities  and 
‘speculative’ investments. 

Against  this  background,  stakeholders  have  strongly  advocated  broadening  the  scope  of 
eligible  investment  assets  in  a  manner  that  is  both  suitable  for  the  optimal  execution  of 
investment  strategies  by  ELTIF  managers  and  consistent  with  the  underlying  objectives  of 
long-term sustainable growth.  

Stakeholders have also called for more legal certainty and flexibility around the facilitation of 
the  funds-of-funds  strategies,  criteria  for  investments  in  third-country  undertakings,  the 

6 

 
 
 
 
 
 
 
 
 
 
 
 
inclusion  of  ‘financial  undertakings’,  a  broader  scope  of  ‘real  assets’  and  the  calibration  of 
certain  numeric  thresholds  set  out  in  the  ELTIF  Regulation,  such  as  a  EUR 500  million 
market capitalisation threshold for listed undertakings and the EUR 10 million threshold for 
real assets. In the view of a sizable number of stakeholders, a broarder scope and more legal 
clarity  for the eligibility of assets and investments would  make the ELTIF legal  framework 
more appealing for asset managers. 

Against this background, it appears appropriate to review the scope of the eligible assets and 
investments  so  that  ELTIF  managers  can  pursue  a  wider  range  of  investment  strategies 
tailored to market circumstances, investment expertise and investor demand. 

7. 

DIVERSIFICATION AND PORTFOLIO COMPOSITION RULES  

The  ELTIF  Regulation  contains  detailed  requirements  for  the  portfolio  composition  and 
diversification.  Such  rules  were  put  in  place  to  limit  risk-taking  by  ELTIFs  and  to  reduce 
counterparty risk by imposing clear diversification requirements.  

Article  13(2)  sets  out  that  an  ELTIF  may  not  invest  more  than:  10%  of  the  capital  in 
instruments issued by, or loans granted to, any single qualifying portfolio undertaking;  10% 
of the capital directly or indirectly in a single real asset; 10% of the capital in units or shares 
of  any  single  ELTIF,  European  Venture  Capital  Fund  (EuVECA)  or  European  Social 
Entrepreneurship  Fund  (EuSEF);  and  5%  of  the  capital  in  assets  referred  to  in 
Directive 2009/65/EC  relating  to  undertakings  for  collective  investment  in  transferable 
securities (UCITS)22 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 may not exceed 20% of the value of the capital of the ELTIF. The Regulation also 
sets  detailed  rules  to  limit  the  discretion  of  the  ELTIF  managers  in  deviating  from  the 
diversification conditions and asset weightings. 

Overall, stakeholders said they preferred fewer regulatory requirements and more flexibility 
for  portfolio  composition  and  diversification.  In  general,  there  was  criticism  of  the 
requirement  not  to  invest  more  than  10%  of  ELTIF  capital  in  any  other  single  ELTIF, 
EuVECA or EuSEF, preventing ELTIFs from pursuing fund-of-funds strategies. Stakeholders 
strongly  argued that investing through a fund of funds  would provide investors  with  higher 
levels  of  diversification,  lower  volatility  and  an  additional  layer  of  screening  and 
diversification.  Such  stakeholders  viewed  access  of  ELTIFs  to  fund-of-funds  investment 
strategies  as  a  tangible  advantage  of  the  ELTIF  framework  and  expressed  the  view  that 
investor protection, e.g. against the possibility of the layering of fees, could be addressed in 
an effective manner. 

There  has  been  overall  support  for  removing  the  concentration  limits  to  fund-of-fund 
structures in order to promote a broader selection of investment styles for investors, without 
diminishing diversification of the underlying assets. The 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. The majority of 

22 OJ L 302 17.11.2009, p. 32, as amended. 

7 

 
 
 
 
 
 
 
 
 
 
                                                           
respondents  proposed  increasing  the  diversification  limits  to  20%.  Furthermore,  the  25% 
concentration  ratio  was  also  deemed  too  restrictive,  given  that  asset  managers  sometimes 
adopt structures under which they might be the sole or anchor investor in another fund. Some 
stakeholders were of the view that the current diversification rules are appropriate for ELTIFs 
marketed  to  retail  investors.  Yet,  they  appear  to  be  too  stringent  compared  to  other  AIFs 
marketed to professional investors.  

In this context, serious consideration should be given to the possibility of differentiating the 
portfolio  composition  and  diversification  requirements,  as  well  as  concentration  limits,  for 
those  ELTIFs  solely  marketed  to  professional  investors  and  ELTIFs  marketed  to  retail 
investors. 

8. 

BORROWING OF CASH  

The  majority  of  stakeholders  called  for  increased  leverage  limits  or  deletion  of  the  30% 
leverage  threshold  and  aligning  the  ELTIF  legal  framework  with  that  of  the  AIFMD.  They 
believe this increased flexibility will enhance ELTIF’s capability to support the financing of 
assets  (in  particular  those  of  SMEs)  and  improve  fund  returns.  It  has  been  argued  that 
the 30%  restriction  on  borrowing  compares  unfavourably  with  other  retail  funds  (including 
the product-regulated UCITS, which can achieve a leverage of up to 100% of their assets).  

Some  stakeholders  called  for  the  total  allowed  leverage  of  ELTIFs  to  be  increased  to  at 
least 100%,  with  ELTIFs  available  only  for  institutional  investors  to  exceed  this,  provided 
they fulfill conditions related to investment strategy, governance, investor base and oversight.  

Several stakeholders were of the view that even if the borrowing limits were increased, such 
an increased borrowing would not automatically equate to increased risks for investors. 

In general, there has been substantive evidence that  increasing the borrowing limits appears 
to be warranted and would not create any additional systemic risk, as the ELTIF has a long-
term investment strategy and limited redemption opportunities. 

9.  

CONCLUSIONS  

The ELTIF regulatory framework was reviewed in view of the need to assess the low ELTIF 
uptake  and  to  ensure  that  the  functioning  of  the  ELTIF’s  framework  continously  meets  the 
objectives  of  the  ELTIF  Regulation.  The  ELTIF  Regulation  has  a  number  of  objectives, 
including channelling  capital  flows to  real  economy investments,  providing an AIF product 
accessible to retail investors with long-term investment needs, and establishing an EU-wide 
passport  for  the  marketing  of  ELTIFs.  In  this  context,  the  Commission  has  carried  out  a 
detailed evaluation to assess the extent to which current ELTIF rules have met their principle 
objectives and in particular whether they have been efficient, effective, coherent, and relevant 
and have provided EU added-value.  

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 
financial system’s ability to channel the savings of governments, corporates and households 
safely and efficiently to the right investments through open and competitive markets. ELTIFs 
may  have a crucial role to play in this area by providing a dedicated investment product to 
mobilise  capital  for  the  financing  of  projects  in  such  areas  as  transport  infrastructure, 

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sustainable  energy  generation  or  distribution,  social  infrastructure  (such  as  housing  for 
seniors or hospitals) and the roll-out of new technologies and systems that reduce the use of 
resources and energy and further the growth of Europe’s SME sector.  

The  evaluation  of  the  ELTIF  regulatory  framework  has  compiled  sufficient  evidence  that 
policy intervention and the targeted review of the ELTIF Regulation are warranted to ensure 
that  more  investments  are  channelled  to  businesses  in  need  of  capital  and  to  long-term 
investment projects. This review would aim to increase the uptake of ELTIFs for the benefit 
of the Union economy and investors. This, in turn, would support the continued development 
of the CMU whose aim is also to make it easier for EU companies to access more stable and 
diverse long-term financing.  

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