The regulation on European Long-Term Investment Fund (ELTIF) of the European Union (EU) entered into force in 2015. A long-term investment fund is a fund that invests on long-term projects such as infrastructure projects and real estate, but also small and mediums enterprises (SMEs).

The regulation was aimed to support the development of EILTFs as an alternative long-term investments vehicle for institutional as well as retail investors, and enhance long-term investments in the economy as a whole. In fact, long-term projects financing potentially supports the EU 'smart, sustainable and inclusive' growth.

As of 2021 -- six years after the regulation was in force -- only 57 ELTIFs have been authorised and a relatively small amount of net assets are under management (estimated at approximately 2.4 billion € in 2021). Therefore, despite the new legislative framework set out by the EU, the data indicates that the market has not scaled up as expected, particularly given the Commission's objective of promoting long-term finance in the EU.

On 24 September 2020, the Commission proposed a new action plan to strengthen the Capital Market Union (CMU) of the EU. The action plan includes three objectives and 16 associated actions, of which 'Action 3 - Supporting vehicles for long-term investment' is part of 'Objective 1: Support a green, digital, inclusive and resilient economic recovery by making financing more accessible to European companies.'

On 25 November 2021, the Commission tabled the proposal amending the ELTIF Regulation with a view to increase the uptake of long-term investment vehicles and make them more appealing to investors. The key changes involve differentiating between ELTIFs marketed to professional investors and those to which retail investors can have access; removing barriers to retail investor access to ELTIFs; and establishing an optional liquidity window mechanism for redemptions, for cases where investors need to exit early.

In its mandatory Opinion of 29 July 2022, the European Economic and Social Committee (EESC) strongly supports the proposed amending regulation, as its previous format did not achieve its goals. The opinion also emphasises that the proposal is timely and relevant since it the revision of the regulation can substantially support economic growth and job creation in the EU.

The Council adopted its General Approach on 20 May 2022.

In Parliament, the dossier is assigned to the Committee on Economic and Monetary Affairs (ECON), rapporteur: Michiel P. Hoogeveen (ECR, the Netherlands). The Committee draft report was voted in Committee on 20 June 2022, and tabled for Plenary on 29 June 2022.

A provisional agreement was reached on 19 October 2022. The agreement overcomes a number of supply and demand limitations, and clarify the scope of eligible assets and investments, the portfolio composition and diversification requirements, the conditions for borrowing and lending of cash and other fund rules, including sustainability aspects. The amendments would also make it easier for retail investors to invest in ELTIFs while ensuring strong investor protection.

The text agreed was approved at first reading in Committee on 12 January 2023, and a debate took place in plenary on 14 February 2023. The text was adopted in plenary on the same day by 492 to 109 votes (27 abstentions).

The final act was published in the official journal on 15 March 2023.

References:

• EP Legislative Observatory, Amendments to the European Long-Term Investment Funds (ELTIFs) Regulation, 2021/0377(COD)  
• European Commission, Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2015/760 as regards the scope of eligible assets and investments, the portfolio composition and diversification requirements, the borrowing of cash and other fund rules and as regards requirements pertaining to the authorisation, investment policies and operating conditions of European long-term investment funds, COM(2021)0722
• European Parliament, Committee on Economic and Monetary Affairs report on the proposal for a regulation amending Regulation (EU) 2015/760 as regards the scope of eligible assets and investments, the portfolio composition and diversification requirements, the borrowing of cash and other fund rules and as regards requirements pertaining to the authorisation, investment policies and operating conditions of European long-term investment funds, 2021/0377(COD)
• Regulation (EU) 2015/760 of the European Parliament and of the Council of 29 April 2015 on European long-term investment funds
• European Economic and Social Committee (EESC), Opinion on the Proposal for a Regulation amending Regulation (EU) 2015/760 as regards the scope of eligible assets and investments, the portfolio composition and diversification requirements, the borrowing of cash and other fund rules and as regards requirements pertaining to the authorisation, investment policies and operating conditions of European long-term investment funds (COM(2021) 722 final — 2021/0377 (COD)), July 2022.
• Council, Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2015/760 - Letter to the Chair of the European Parliament Committee on Economic and Monetary Affairs, 7 December 2022
• Regulation (EU) 2023/606 of the European Parliament and of the Council of 15 March 2023 amending Regulation (EU) 2015/760 as regards the requirements pertaining to the investment policies and operating conditions of European long-term investment funds and the scope of eligible investment assets, the portfolio composition and diversification requirements and the borrowing of cash and other fund rules

Further reading

• European Parliament, Amending the European Long-Term Investment Funds (ELTIF) regulation, EPRS Briefing, April 2023.

Author: Issam Hallak, Members' Research Service, legislative-train@europarl.europa.eu