EU amends ELTIF regulation – attractive new options for investors

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Finance Finland is in favour of amending the regulation on European long-term investment funds (ELTIFs).
The amendments will simplify the ELTIF framework and harmonise it with the MiFID investor protection framework.
The revised ELTIF regulation is intended to make European long-term investment funds more attractive.
It is important to ensure that also retail investors are offered a wide range of different investment products to choose from.

ELTIFs are the only type of funds dedicated to long-term investments that can be distributed on a cross-border basis to both professional and retail investors. Since ELTIFs are designed to channel long-term investments, they are well placed to help finance the green and digital transitions and other long-term schemes. The European Parliament has now adopted the amendments to the ELTIF regulation proposed by the Commission. The adoption of ELTIF 2.0 falls under the EU’s wider Capital Markets Union initiative.

The EU is amending the regulation on European long-term investment funds (ELTIFs) that can be distributed on a cross-border basis to both professional and retail investors. Adopted by the European Parliament in February, the revised framework will harmonise and simplify regulation. ELTIF 2.0 will become applicable on 10 January 2024.

“The crux of the MiFID measures on strong investor protection is to offer investors a good understanding of and relevant information on how their investments work. It is important to ensure that also retail investors are offered a wide range of different investment products to choose from. It is crucial that the rules and regulation applied to other investments will also apply to ELTIFs”, says Jari Virta, head of asset and fund management at Finance Finland.

Because of regulatory obstacles, ELTIFs have not become a very well-known fund type or attracted the interest of the fund industry or investors. Virta believes that thanks to the revised regulation, ELTIFs will now become an attractive and competitive long-term investment product.

“So far, ELTIFs have not been a great success, but long-term illiquid investments play an important role in investment. Functional and logical EU regulation will benefit all parties: investors, investees and fund managers alike.”