Final version of RTS for ELTIFs adopted by the EU Commission

European long-term investment funds (ELTIFs) are the only type of funds across the European Union dedicated to long-term investments which can be distributed on a cross-border basis to both professional and retail investors. Since ELTIFs are designed to channel long-term investments across the European Union, they are well placed to help finance the energy, social and transport infrastructure projects, promote the green and digital transitions, and the European Union's real economy at large.

On 19 July 2024, the European Commission has adopted and published a Delegated Regulation supplementing Regulation (EU) 2015/760, as amended (the ELTIF 2.0) which itself contains certain regulatory technical standards (the RTS) on certain aspects of ELTIFs. The RTS are the result of long discussions between the European Securities and Markets Authority (ESMA) and the EU Commission.

The final version of the RTS, reflecting the needs of the industry, contains more flexible rules, compared to the previous versions, and gives more discretion to the ELTIF managers in important matters as redemption policy, choice of the liquidity management tools, minimum holding periods and notifications.

The RTS clarify certain aspects on ELTIF 2.0, including:

?? Liquidity management tools (LMTs): Contrary to previous versions, the final RTS have no mandatory "default" anti-dilution LMTs. ?An ELTIF manager may (optionally) implement at least one anti-dilution LMT, such as anti-dilution levies, swing pricing and/or redemption fees.

?? Hedging: Hedging is permitted where it is ‘economically appropriate’ for the ELTIF, consistent with the risk-profile of the ELTIF and aimed at a verifiable reduction of the risks.

?? Communication of certain information on redemptions to the national regulator: Where an ELTIF permits redemptions, its manager must provide the ELTIF’s national regulator with certain information such as the periodicity and duration of the redemptions, a description of the available LMTs, the conditions for their activation and the conditions and procedures for requesting redemptions and for processing the redemption requests received.

?? Adjustment of redemptions: The percentage of an ELTIF’s assets which can be redeemed to be adjusted, at its manager’s discretion, on the basis of either the ELTIF’s redemption frequency and notice period or the ELTIF’s redemption frequency and minimum percentage of liquid assets.

?? Minimum holding period. Unlike previous versions, the finals RTS do not contain any strict requirements of a duration of a minimum holding period. An ELTIF manager can tailor a minimum holding period, provided it considers a list of criteria such as the ELTIF’s underlying asset classes, their liquidity profile, and their position in their life-cycle and the ELTIF’s investment policy.

?? Matching of transfer requests. An ELTIF may, subject to satisfying specific criteria, choose to provide for a matching mechanism under which transfer requests of shares of an ELTIF from an exiting investor can be “matched” with transfer requests by potential investors.

?? Costs disclosure: The RTS outlines harmonised definitions, calculation methodologies and presentation formats of the costs of an ELTIF.

The RTS are now in the hands of both the EU Parliament and the Council for their review. Should there is no extension of the review of or no objection on the RTS within the next three months, the RTS will enter into force towards the end of 2024.

For more information, please follow the link to the Delegated Regulation including the RTS: https://ec.europa.eu/transparency/documents-register/detail?ref=C(2024)4991&lang=en

For more details, check out our alert or feel free to contact Catherine Pogorzelski , Caroline Pimpaud , Bahya Bouharati, Ph.D. , Christoforos Soteriou , and Margarita Eloeva .