Funding long-term investment in the EU’s economy
SUMMARY OF:
European long-term investment funds - Regulation (EU) 2015/760
SUMMARY
WHAT DOES THE REGULATION DO?
It sets out EU-wide rules for the authorisation, investment policies and operating conditions of European Long-Term Investment Funds (ELTIFs)*.
KEY POINTS
An ELTIF must comply with this Regulation to be marketed in the EU.
Types of investment
ELTIFs are targeted at particular types of alternative investment including:
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unlisted companies
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debt instruments for which a buyer cannot be easily identified
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real assets* that require significant initial investment
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small and medium sized enterprises (SMEs) with capitalisations of up to €500 million that have been admitted to trade on a regulated market.
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Authorisation
An application to become an ELTIF must include:
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the fund rules or instruments of incorporation*
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information on the identity of the proposed manager of the ELTIF and their current and previous fund management experience and history
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information on the identity of the depositary*
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a description of the information to be given to investors, including the arrangements for dealing with complaints submitted by retail investors.
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To apply and to get authorisation, fund managers themselves must be authorised under Directive 2011/61/EU. The European Securities and Markets Authority keeps a central public register of each authorised ELTIF along with its respective manager and competent authority.
Liability
Managers are responsible for ensuring compliance with the Regulation and for any infringement. They are also responsible for any losses or damages which result from non-compliance.
Investment policy
ELTIFs are subject to specific investment rules, amongst others they:
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must invest at least 70 % of their capital in clearly-defined categories of eligible assets
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are only allowed to trade up to 30 % of their capital in assets other than long-term investments.
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Different types of assets are eligible for investment including:
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real assets with a value of more than €10 million that generate an economic and social benefit
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commercial property or housing that contribute to smart, sustainable and inclusive growth or to EU energy, regional and cohesion policies.
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Protection of investors
The Regulation sets out rules to strengthen the protection of investors:
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the manager of the ELTIF or any distributor, should ensure that a retail investor (with a portfolio not exceeding €500,000) does not invest in total more than 10 % of the investor's portfolio in ELTIFs
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an ELTIF should be able to offer investors, under certain conditions, the opportunity to redeem their units or shares before the end of the life of the fund. Those rights and their main features should be clearly predefined and disclosed in the rules or instruments of incorporation of the ELTIF
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where an ELTIF offered or placed to retail investors is due to last more than 10 years, the manager or distributor should indicate clearly in writing that the product may not be suitable if the investor cannot support a long-term investment or if they need their investment to be easily redeemable.
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WHEN DOES THE REGULATION APPLY?
From 9 December 2015.
BACKGROUND
European long term investment funds
KEY TERMS
* European Long-Term Investment Funds (ELTIFs) are aimed at investment fund managers who want to provide long term investment to institutional and private investors across Europe. They target specific types of projects which require long-term funding to develop successfully but struggle to get financing.
* Real assets: an asset that has value due to its own substance and properties such as gold, oil or property.
* Instruments of incorporation: formal documents filed with a government body to legally document the creation of a company.
* Depositary: a bank or company which holds funds or securities deposited by others, and where exchanges of these securities take place.
ACT
Regulation (EU) 2015/760 of the European Parliament and of the Council of 29 April 2015 on European long-term investment funds
REFERENCES
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Act |
Entry into force |
Deadline for transposition in the Member States |
Official Journal |
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Regulation (EU) 2015/760 |
8.6.2015 |
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RELATED ACTS
Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (OJ L 174, 1.7.2011, pp. 1-73)
last update 15.10.2015