Debate: Amendments to the European Long-Term Investment Funds  Regulation
Date: TUESDAY, 14 FEBRUARY 2023
Speaker: Michiel Hoogeveen
Country: Sweden
Language: EN

Introduced in 2015, ELTIFs were an important building block for the Capital Markets Union to diversify funding of the economy. However, ELTIFs failed to take off successfully; too much red tape and stringent regulations restricted the true potential of the ELTIF framework. We addressed this underdevelopment of the ELTIF regime. Excitingly, we are now hearing from EU asset managers and investor representatives that there is much appetite for new ELTIFs. As a result, this fund segment will grow by tens and, hopefully, hundreds of billions of euros over the next 3 to 5 years and ultimately be invested in the real economy. Let me briefly summarise the five most important achievements of this ELTIF reform.  First, we have broadened the scope of the investment universe. We ensured that long—term investments can be channelled to more diverse uses and projects: real estate, infrastructure projects, SMEs, listed companies, equity and debt instruments, loans, and specific asset classes such as securitisations. On balance, we have broadened the investment choices of retail investors and made financial products more accessible. Up to this day, this was mostly reserved for institutional investors and privileged high—net—worth individuals. Second, we have allowed ELTIFs to pursue a broader international investment mandate and, very importantly, enabled broad fund—to—fund investment strategies, which must be combined with an effective look—through approach. Third, we have allowed ELTIFs to become more concentrated and permitted more structuring and co-investment flexibility, as well as using higher but still safe levels of borrowing. Fourth, we have allowed ELTIFs not only to be closed—ended, but also to pursue redemptions before the end—of—life cycle. This creates flexibility in terms of both open—endedness and evergreen structures. As an optional feature, we have allowed ELTIFs to put in place the liquidity—matching mechanism. All these features should clearly benefit ELTIF investors. Fifth, and finally, we have put in place a strong framework for the protection of retail investors and reinforced it with a suitability assessment that is mandatory for all retail investors. This safeguard is essential to prevent mis—selling and to ensure that retail investors can only invest in ELTIFs suitable for them. The co-legislators went further and introduced an extra requirement for express investor consent, as well as an investor alert to bring to the attention of retail investors the potential risk of investing. On balance, we delivered a solid and comprehensive reform. We must now carefully monitor the uptake of this fund segment and ensure that the reform delivers on its objectives. I call on market participants to ensure that the new ELTIFs are of high quality and designed with the interests of investors in mind. Let me conclude by thanking the shadow rapporteurs, the ECON Chair, and the colleagues in the European Parliament who have worked on, or otherwise contributed to, this reform. I also want to thank and recognise the work of the Council, particularly the French and Czech presidencies. Lastly, I thank the European Commission for its proposal, which was a strong starting point and should be an inspiration for future initiatives.