Regulation 2015/760 of 29 April 2015 on European Long-Term Investment Funds was published in the Official Journal of the European Union on 19 May 2015 (the “ELTIF Regulation”). The ELTIF Regulation will be binding in its entirety and directly applicable in all Member States from 9 December 2015. Therefore the EU Member States do not need to make any implementation legislation (as would be the case with an EU Directive).

An ELTIF is an investment vehicle that is neither a UCITS nor a pure AIF; rather, instead, it has the characteristics of both. It is available for marketing to all types of investors (including institutional and retail investors) across the EU. An ELTIF’s assets classes are restricted in such a way that it provides long-term stability to the fund, which will create stable investor returns and provides the vehicle with the opportunity to finance long-term (illiquid) investments.

An application for ELTIF authorisation must be made to the ELTIF’s national competent authority. An ELTIF must comply with a number of requirements, including the following:

- it must be an EU AIF managed by an authorised AIFM; and

- 70% of its capital must be invested in eligible investment assets (as described below).

Unlike other funds, the investors have, as a rule, no redemption rights until the end of the fund’s lifetime, which makes it a suitable vehicle for investing in illiquid projects.

The ELTIF Regulation provides a description of what are eligible assets in which the ELTIF can invest. Broadly speaking, an ELTIF can invest in: equity or quasi-equity instruments issued by a qualified portfolio undertaking; debt instruments and loans issued by qualified portfolio undertakings; and units or shares in other ELTIFs, EuVECAs or Eu SEFs. It may also hold directly or indirectly real assets that have a minimum value of EUR 10,000,000, such as qualified commercial property, infrastructure and other assets that give rise to economic and social benefit.

A qualified portfolio undertaking is, according to the ELTIF Regulation, broadly-speaking, an undertaking that is involved in portfolio activities and is not a financial institution. It can be listed or not listed.

The ELTIF Regulation provides also for strict diversification requirements.

Certain matters of the ELTIF Regulation will have to be further clarified as Level 2 measures. ESMA issued a consultation paper proposing a number of technical standards. The consultation period closes on 14 October 2015.