Stability and benefits to wider economy, get ready for ELTIFs

Luxembourg ready for European long-term investment funds

On 20 April 2015 the council of the European Union agreed to adopt a regulation that would provide for a new kind of fund vehicle for the creation of increased capital for long-term investment in the EU economy.

These so-called European long-term investment funds (ELTIFs) provide an opportunity for certain types of investors to find stability and profitability through the utilisation of an economy-boosting regulation designed to benefit all.

This is because as well as benefiting investors it is thought that European long-term investment funds will help bolster investment in vital infrastructure projects, creating jobs and enhancing Europe-wide economic prosperity.

However, these funds are not likely to be for everyone; they are alternative investments that require a particular kind of investor who is looking to commit long term in exchange for capital appreciation vs stable returns. There will also be numerous additional rules for ELTIFs; for example, at least 70% of capital must be invested in certain asset categories, while non-long-term asset investment will be restricted to a maximum of 30% of capital.

Furthermore, only alternative investment funds managed by specialist fund managers (AIFM as defined by directive 2011/61/EU) will be able to be styled as ELTIFs.

The move to establish ELTIFs forms part of the Europe 2020 Strategy, which aims to place Europe on a path towards a "smart, sustainable and inclusive economy".

The ELTIF Regulation will become directly applicable to Luxembourg law from 9 December 2015 without the need for any further regulatory, legal or statutory procedures.