The European Long-Term Investment Fund (ELTIF) stands as an investment instrument introduced for economic policy purposes to provide additional financing options to certain industries and companies. Spawned by the EU Commission in 2015, the uptake for ELTIF’s has been sluggish despite its potential benefits. As of July 2023, just 95 ELTIFs existed, according to the European Securities and Markets Authority (ESMA) public register. This article seeks to provide a detailed exploration of the ELTIF as a possible alternative to open real estate public funds. Read more here.
From an analytical perspective, it’s important to understand why ELTIF’s adoption has been slow despite being geared to fill a vital need in the market. We delve into the key features and benefits of ELTIFs for investors.
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ELTIFs allow large institutional investors—such as pension funds and insurance companies—to make long-term investments in companies. This facilitates growth and job creation in the EU, thereby contributing to the functionality of the internal market.
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They offer access to financing opportunities for specific projects or companies that would otherwise be financially constrained or out of reach. This secures potential growth and returns on investment more than traditional options.
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Last but not least, ELTIFs provide investors with a chance to invest in real assets, something which is not usually possible with UCITS, for instance.
Outlined are the potential inhibitors to the more widespread adoption of ELTIFs:
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High ticket sizes for ELTIF investments, making it difficult for smaller investors to participate.
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Lack of understanding and awareness of these investment tools, coupled with perceived complexity.
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Poor liquidity and redemption rights are concerns for potential ELTIF investors.
These concerns beg the question: “Is ELTIF 2.0 a viable alternative to open real estate public funds?” This debate is further inflamed by the ongoing review of the ELTIF regulation by the EU Commission. Further exploration of this subject can be undertaken by reading the full briefing here.