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EU long-term investment fund
On 26 June 2013, the European Commission published proposals for a Regulation on European Long-term Investment Funds (“ELTIFs”). The main purpose is to create a crossborder
fund vehicle to increase the amount of non-bank finance available for companies in the European Union requiring access to long-term capital for the purposes of projects
relating to infrastructure, housing and real estate.
The regulation will introduce a European passport for a closed-ended vehicle for long-term investment in infrastructure and real estate (European Long-term Investment Funds or "ELTIFs”)
on similar lines to the existing UCITs regime. For institutional investors, it should in theory make little difference as passporting will be available under the EU Alternative Investment Fund Managers' Directive (AIFMD) and all ELTIFs will fall within the AIFMD. The main distinction between AIFMD
and the ELTIF regime is that ELTIFs will be open to retail investors, when the Key Information Document (KID) regulations are enacted.
There are areas of ambiguity in the proposed regulations that need to be clarified and there are key areas in which ESMA has been delegated the task of determining detailed rules. The provisions in respect of fund duration are likely to be key.
The new regulation has the possibility of being a stimulus to product development particularly if there are initiatives around the secondary trading in fund units to allow longterm
investment vehicles with shorter-term liquidity.