ELTIF

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Definition

ELTIF

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Salma Moumen

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According to the European Commission, investment needs for the energy transition, infrastructure, and innovation amount to hundreds of billions of euros each year.

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According to the European Commission, investment needs in the energy transition, infrastructure, and innovation amount to hundreds of billions of euros each year. To channel more savings toward these long-term projects, the European Union has created a specific framework: the ELTIF, or European Long-Term Investment Fund.

Thoroughly overhauled under the ELTIF 2.0 regulation, which took effect in January 2024, this investment vehicle aims to facilitate investors’ access to unlisted assets, while harmonizing rules at the European level.

But what exactly is an ELTIF? What assets can it hold? Who is it intended for? What are its advantages, and how does it differ from an FPCI other private equity funds? This article answers these questions to help you better understand this European framework.

What is an ELTIF?

An ELTIF is a European regulated fund established by Regulation (EU) 2015/760 to promote the financing of the real economy.

Its goal is simple: to enable investors to finance long-term projects that require patient capital.

These investments include, in particular:

unlisted companies,
growing small and medium-sized businesses,
infrastructure,
projects related to the energy transition,
private debt,
certain real estate assets.

Unlike traditional UCITS, an ELTIF may invest a significant portion of its portfolio in illiquid assets, which generally have an investment horizon of several years.

Since the introduction of ELTIF 2.0, investment rules have been relaxed to expand investment opportunities and make this vehicle more attractive.

Table: Key Characteristics of an ELTIF

Why did the European Union create ELTIFs?

The financing of European companies still relies heavily on bank credit.

However, some projects require capital to be available for several years:

industrial development,
infrastructure,
innovation,
energy transition,
disruptive technologies.

The European Union's goal is therefore to mobilize more private savings to support these long-term investments.

ELTIFs thus contribute to the development of the Capital Markets Union, which aims to diversify the sources of financing for the European economy.

What types of assets are included in an ELTIF?

One of the distinctive features of ELTIFs is their ability to invest in assets that are not readily accessible through traditional investment vehicles.

According to the fund's strategy, the following are included, among other things:

Private Equity

Equity investments in unlisted companies.

Private debt

Direct financing of businesses through loans.

Infrastructure

Renewable energy, power grids, transportation, telecommunications.

Real Estate

Certain real estate projects that meet the criteria set forth in the regulations.

Small publicly traded companies

Subject to certain conditions set forth in ELTIF 2.0.

This diversification provides investors with exposure to various drivers of value creation.‍

ELTIF 2.0: What Are the Main Changes?

The ELTIF Regulation has been thoroughly revised to speed up its adoption.

Among the key developments:

Easier access for individual investors

Certain investment restrictions have been removed, including the minimum threshold of €10,000 and the rule limiting individual exposure in certain cases.

Expanded Investment Universe

More assets are becoming eligible.

More flexibility

Managers now have greater flexibility in building portfolios.

Simplified European Distribution

The goal is to promote the marketing of these funds throughout the European Union.

This reform partly explains the growing interest in ELTIFs since 2024.

What are the benefits of an ELTIF?

ELTIFs have several features that may be of interest to investors seeking exposure to private markets.

Accessing Unlisted Assets

They allow investors to invest indirectly in companies or projects that are typically reserved for institutional investors.

Diversifying a Portfolio

Private assets often exhibit dynamics that differ from those of public markets.

Investing for the Long Term

ELTIFs are designed to support projects whose development spans several years.

European Regulatory Framework

The regulation harmonizes the requirements applicable to fund managers and funds at the European level.

What are the limitations of an ELTIF?

Like any investment, an ELTIF also comes with certain limitations.

Reduced liquidity

The underlying assets are generally illiquid.

A Long-Term Perspective

Investments are often planned over a period of several years.

Market Risks

The value of investments may go up or down.

Variable performance

Past performance is not indicative of future results and depends, in particular, on the quality of asset selection and the economic environment.

Feature	ELTIF
Regulations	European
Horizon	Long-term
Assets

ELTIF or FPCI What Are the Differences?

Although both of these vehicles can invest in private equity, they operate differently.

Criterion	ELTIF	FPCI
Regulatory Framework	European Regulation (ELTIF)	French Regulations (Monetary and Financial Code)
Distribution in the European Union	Yes, thanks to the European passport	Possible under applicable rules, but not through the ELTIF framework
A harmonized framework at the European level	Yes	No
Investment strategies	Private equity, private debt, infrastructure, real estate, and other eligible assets	Primarily private equity and assets eligible for FPCI
Horizon	Long-term	Long-term
Target Audience	Professionals and individuals (subject to the fund's terms and conditions)	Primarily professional or sophisticated investors

In practice, an ELTIF is a European regulatory framework, while an FPCI a French legal structure that can be used to invest in private equity.

Who is an ELTIF intended for?

An ELTIF may be suitable for investors who:

wish to diversify their assets;
are seeking exposure to private markets;
have a long-term investment horizon;
accept a lower level of liquidity than that of exchange-traded funds.

However, whether an ELTIF is a good fit depends on an investor’s financial situation, investment goals, and ability to tie up a portion of their capital for several years.

Key Takeaways

An ELTIF is a European fund focused on long-term investments.
It may invest in private equity, private debt, infrastructure, and certain real estate assets.
ELTIF 2.0, which has been in effect since January 2024, has relaxed the rules to promote its growth.
This instrument is designed to channel savings toward financing the real economy.
ELTIFs offer regulated access to unlisted assets, but generally involve a long investment horizon and limited liquidity.

FAQ

What is an ELTIF?

An ELTIF is a European fund designed to invest in long-term assets such as private equity, private debt, infrastructure, or certain real estate projects.

Are ELTIFs and private equity the same thing?

No. Private equity is an asset class, whereas an ELTIF is a European regulatory framework that can invest, among other things, in private equity.

Can an individual invest in an ELTIF?

Yes. Since the introduction of ELTIF 2.0, access for retail investors has been made easier, subject to the specific terms and conditions of each fund.