A New Era for European Investment Funds
The original European Long-Term Investment Fund (ELTIF) introduced in 2015 struggled to gain traction due to its stringent requirements. However, this year, the EU introduced significant reforms to make these funds more attractive, aiming to enable public investment into alternative asset classes.
The main amending regulation took effect in January 2024, but one crucial accompanying implementing regulation—potentially a deal-breaker due to debates between ESMA and the European Commission—was only adopted and published at the end of October 2024. As a result, the ELTIF 2.0 discussion is just beginning to resonate within the financial sector.
This shift is opening doors across the EU, creating new opportunities for fund managers, including those from the Czech Republic, to expand into other EU markets. For example, Luxembourg, a leader in fund management, has been highly active in preparing for these reforms and is expected to launch new ELTIF funds soon.
ELTIF 2.0 is a hybrid between funds for professional investors (FKvI) and retail collective investment schemes (FKI). It offers greater portfolio flexibility, similar to FKvI (with some exclusions, such as jewelry or wine), while also allowing public investment. Investors must simply pass a suitability test based on the standard investment questionnaire.
One of ELTIF’s major advantages over FKvI and certain FKI (like specialized funds) lies in its streamlined cross-border offering across the EU. Unlike the lengthy and sometimes unfavorable notification process for funds under national law, ELTIFs require only home-country regulator approval, making cross-border distribution significantly easier. ELTIF is governed by a direct EU regulation, ensuring a consistent regime across all member states. In contrast, FKvI and certain FKI are implemented via the AIFMD directive, which requires national transposition.
The ELTIF reform offers fund managers an exciting new tool to attract both retail and professional investors, combining flexibility and accessibility with straightforward EU-wide distribution. The door is now open—are you ready to step through?
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