Rethought and greatly enhanced:
how ELTIFs are widening the investment spectrum for retail clients and (semi-) institutional investors

Another major reform is that ELTIFs may invest in funds of funds. These target funds do not have to be ELTIFs, EuVECAs, or EuSEFs themselves; they can be UCITS and AIFs, provided that they are domiciled in the EU area, are managed by an EU AIFM, and contain only assets in which an ELTIF may invest directly. However, the assets themselves may well be located outside the EU area. The same applies to direct investments, as long as the target companies are not on any EU blacklist. To avoid multi-layered fund-of-funds structures, the target fund may not invest more than 10 per cent of its assets in other investment funds.

The new general concept is driving up demand for ELTIFs – and, consequently, supply

The European Union’s reform of the ELTIF concept is paying dividends: according to data from the European Securities and Markets Authority (ESMA), 159 ELTIFs are currently registered, 62 of which were authorised by supervisory authorities in 2024 alone. Luxembourg remains the leader with 100 funds, followed by France (32) and Italy (13). The importance of Ireland as a domicile is also growing, with 11 registered ELTIFs at present. (Source: ESMA ELTIF Register, as at 7 March 2025).

One major advantage of ELTIFs for providers is the distribution aspect: since no additional distribution authorisations are necessary (merely a notification process), the ELTIF can be marketed in other EU countries without any obstacles – an advantage, especially in the retail segment.

Focus on the growing interest in ELTIFs among institutional investors

While this investment vehicle is primarily intended to afford retail clients the opportunity to invest in private markets, ELTIFs are also suitable for institutional investors, such as foundations and family offices, due to their flexible configuration.

Different features appeal to different investors: while retail clients focus on the subscription modalities, including the minimum investment requirements and early redemption provisions, institutional investors prioritise optimising the investment strategy and achieving long-term performance.

ELTIFs can also be of a particular interest to Solvency II investors, as they benefit from favourable capital charges in certain cases. For example, the Solvency II Equity Risk sub-module, which imposes a 49 per cent capital charge for unlisted equity investments, can be reduced for suitably structured ELTIFs.

In addition, under certain conditions, the Long-Term Equity Investment (LTEI) sub-module can be applied, facilitating a further significant reduction of the required regulatory capital.

The conditions are that the ELTIF must be long-term, have a certain minimum holding period, and its risk profile must meet the requirements of Solvency II.

Long-term investments in infrastructure, renewable energy, and transport infrastructure

ELTIFs are long-term investment vehicles focusing on infrastructure, renewable energy, and transport infrastructure. Developments in wind power, solar energy, and battery storage are progressing rapidly, and the spectrum of investment opportunities is expanding. For example, interest is growing in technologies, such as hydrogen, energy storage systems, and data centres, which often go hand in hand with renewable energy. Within the three large asset classes – private equity, private debt, and infrastructure – the different maturities and liquidity requirements affect fund structuring. For instance, the maturity of a private equity ELTIF is often shorter than that of an infrastructure ELTIF, while a private debt ELTIF generally has a shorter maturity and the liquidity often higher.

What ELTIF initiators should be mindful of

A major advantage of the new ELTIF 2.0 concept is its flexible configuration. However, there are many factors to consider when structuring an ELTIF. The first question to ask is always: who is the product’s target investor group? For institutional investors, the most important factors are investor-specific regulations, such as the Investment Ordinance and Solvency II, as well as product tax governance. Restrictions on indirect investments under investment law and for investment tax purposes are equally important.

The assignment of tasks and responsibilities – in other words, the individual roles within the fund structure is crucial. These roles, along with the third party AIFM entity, have a significant impact on the operational setup. One of the key issues is the portfolio management function, which mainly affects transaction and liquidity management. In addition, key elements such as valuation frequencies and valuation systems, capital call processes, investment structures, and liquidity management instruments must be carefully established.

Further fund details also must be clarified, such as whether distribution or accumulation is preferred, whether currency management or currency hedging is required, and whether a separate share or unit class should be launched for specific investor groups.

A professional and experienced structuring partner is essential when setting up and investing in an ELTIF.

The European Long-Term Investment Fund offers retail clients and institutional investors a tailored and modern instrument for growth-oriented yet sustainable investment in the real economy.

Due to the new regulation, we are seeing growth in the availability of ELTIFs with different maturities, liquidity levels, and investment approaches. This shows that the European Union’s reform of the ELTIF concept is already delivering tangible benefits.