The newly revamped European Long-Term Investment Fund (ELTIF) regime, known as ELTIF 2.0, is EU alternative investment fund that provides private fund managers with access to both professional and retail clients under a pan-European retail passport.
ELTIFs are meant to boost non-bank investment in real economy, providing alternative source of finance to all sectors of real economy, like infrastructure, energy, and SMEs.
Although ELTIFs were originally created back in 2015, this original regime was quite restrictive and there was little uptake, and as a result, amendments were made to the regime to make it more attractive to private fund managers and for retail investors.
ELTIFs are multi-asset products, and investments can be split in 2 categories, investing at least 55% of capital in Eligible Investment Assets, and up to 45% in all liquid assets.
They are subject to diversification requirements, which differ depending on investor type targeted, for retail investors, they are generally restricted to a 20% restriction in any single issuer or asset, with 30% restriction in units of single collective investment.
As ELTIFs primarily participate in long-term investments, the regulations provide that investors should not be able to request redemption of units before end of ELTIF life.
The main attraction of ELTIF product, is ability to market via pan-European passport.
New Irish ELTIF Regime
The new Irish ELTIF regime, which went live on Mar. 11, 2024 providing a quick and flexible structure that gives managers a faster speed to markets for these products.
ELTIFs may be set up as umbrella Qualifying Investor Alternative Investment Funds (QIAIFs) or even as a new Retail Investor Alternative Investor Funds (RIAIF) structure.
The local rules that generally apply to Irish QIAIFs and RIAIFs are generally disapplied and consequently, ELTIFs are not subjected to any of the gold-plating requirements.
QIAIF ELTIFs will now all be approved under new expedited fast-track authorization process, even where selling to Qualifying Investors, which can include sophisticated high net worth individuals and institutional investors, as well as professional investors.
Conclusion
The recent revamp of ELTIF product and the ability to capture certain high net worth and institutional investors under a streamlined passport notification, is appealing to private fund managers, and can open up their products to a larger pool of investors.
The proposed new Irish ELTIF regime is very flexible and provides speed to market.
The availability of expedited fast track authorization process not only for professional investors but also for certain other Qualifying sophisticated investors, is a key benefit.
These will include both high net worth individuals as well as the institutional investors.
Irish Fund structures are not subject to Irish corporate tax and are not liable for capital gains taxes on any profits or gains and can avail of Ireland’s extensive double-tax treaty network and thereby can avail of reduced rates of foreign withholding taxes.
Unlike ELTIFs established in certain other jurisdictions, which are generally targeted at local/domestic investors, Irish funds will be the preferred choice for managers seeking both the pan-European and global distribution opportunities and the speed to market.
