On 25 October 2024, the European Commission adopted Delegated Regulation (EU) 2024/2759, supplementing Regulation (EU) 2015/760 (the “ELTIF Regulation”) as amended by Regulation (EU) 2023/606 (“ELTIF 2.0"). The new regulatory technical standards (“RTS”), published in the Official Journal of the EU, entered into force on 26 October 2024. These RTS introduced detailed requirements aimed at enhancing the attractiveness, flexibility, and operational clarity of ELTIFs while maintaining investor protection. Below, we summarize the key aspects of this regulatory update.
Key legal provisions of Delegated Regulation (EU) 2024/2759
Redemption policy and liquidity management
The RTS clarify Article 18(3) of the ELTIF Regulation, introducing detailed criteria for implementing redemption policies in semi-liquid ELTIFs. Key points include:
- conditions under which redemptions may occur prior to the ELTIF’s maturity, ensuring alignment with the fund’s investment strategy and liquidity profile;
- the introduction of liquidity management tools such as redemption gates, notice periods, and in-kind redemptions, designed to balance investor liquidity demands and asset liquidity constraints.
Investment restrictions and eligible assets
The RTS provide additional guidance on eligible assets under Article 10 of the ELTIF Regulation, focusing on:
- the conditions for direct and indirect investment in real assets;
- criteria for investments in qualifying portfolio undertakings, including SMEs and real estate;
- expanded flexibility for investments in UCITS and AIFs to improve diversification opportunities.
Cost disclosure and transparency
To improve investor protection, the RTS implemented detailed cost disclosure requirements under Article 23.
The fund managers are now required to provide:
- clear, concise, and standardized pre-contractual disclosures regarding fees and charges;
- periodic cost breakdowns to enhance transparency and comparability across ELTIFs.
Marketing to retail investors
The RTS further aligned ELTIF marketing practices with MiFID II requirements. For example:
- managers must ensure that the target market assessment for retail investors is robust and suitable for the long-term nature of ELTIFs.
- enhanced requirements for distributing ELTIFs via financial intermediaries, ensuring that investors understand the fund’s illiquid nature and associated risks.
Timeline for compliance and implications for market participants
The Delegated Regulation entered into force on 26 October 2024, and the revised framework will apply to all ELTIFs launched thereafter. Existing ELTIFs must assess their structures and documentation to ensure compliance with the new rules, particularly regarding liquidity management, cost disclosures, and marketing strategies.
The ELTIF 2.0 regime seeks to address the operational and practical hurdles that previously limited the popularity of ELTIFs, particularly among retail investors. The updated RTS provide much-needed clarity for fund managers and offer enhanced flexibility to meet the growing demand for long-term, sustainable investment opportunities across the EU.
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