On 26th June 2013, the European Commission published a legislative proposal for a Regulation on European long-term investment funds (ELTIFs). The proposed ELTIF is a new kind of collective investment fund framework which will allow individual and institutional investors to put money into companies and projects that need long-term capital and is designed to increase the amount of non-bank finance available to companies investing in the real economy of the EU.
ELTIFs would be available to all types of investors across Europe subject to certain requirements set out in EU law. These requirements include the types of long-term assets and firms that the ELTIFs are allowed to invest in and the information they have to provide to investors. Any ELTIF manager would also have to comply with all of the stringent requirements of the Alternative Investment Fund Managers Directive.
Under the new proposal, ELTIFs would have to meet a set of common rules so that they: (i) always have a depositary to keep assets safe; (ii) comply with rules on spreading assets to prevent too much money going into one asset; (iii) only use derivatives to manage currency risks in relation to the assets they hold, and not for speculation; (iv) and obey limits on the amount they can borrow.
In contrast to UCITS, ELTIFs will focus on investments in illiquid assets, hence increasing their allure to investors such as pension funds and insurance companies, seeking long-term returns within well-regulated structures.