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The provisional deal on European long-term investment funds (ELTIFs) struck on Wednesday aims to create appropriate regulatory oversight and investor protection safeguards and to accelerate the uptake of ELTIFs, also by retail investors. This should boost the financing of long-term projects such as infrastructure projects, real estate or SMEs throughout the EU.
Protecting investors and more flexibility
All ELTIFs marketed in the EU have to be authorised and MIFID compliant. A test to establish whether an investment product is suitable for retail investors and clear warnings referring to it being sometimes illiquid long-term investment or to value fluctuations will be necessary. A retail investor will have to explicitly consent when investing in a product assessed as not suitable. Finally, MEPs highlighted the need to promote independent financial literacy as key to making ELTIFs more accessible and popular among individual investors.
To foster a more vibrant market, negotiators agreed to the Parliament’s proposal and deleted the minimum threshold for individual real assets set out in the ELTIF regulation to get rid of administrative burdens and the associated costs; they also extended the possibility for ELTIFs to invest in listed companies. Finally, recognising FinTechs’ important role in promoting digital innovation and the overall efficiency of European Union financial markets, MEPs ensured that ELTIFs could invest in such companies within five years of their authorisation.
Sustainable projects
As hundreds of billions of euro in additional investments will be needed to cover the long-term financing gap in the European Union and to reach the 2030 energy and climate targets, MEPs ensured that the regulation refers to the European Green Deal (alongside the “digital agenda for Europe”) as one of the priorities into which long-term investments should be channelled. Moreover, ELTIFs will be able to invest in European green bonds issued under the EU Green Bond Standards, if they meet the requirements of the ELTIF framework on issuance characteristics and long-term focus.
Finally, negotiators agreed that the new rules should apply nine months after their publication in the EU Official journal.