ELTIF 2.0 sees “good traction” one year after launch
European Long-Term Investment Funds (ELTIFs) are seeing “good traction” one year after the official launch of the second iteration of the vehicle, with industry insiders predicting a rise in the number of new ELTIFs this year.
Michael George, fund manager of the M&G Corporate Credit Opportunities ELTIF, told Alternative Credit Investor that the enhancements of the revised structure – dubbed ELTIF 2.0 – have provided the liquidity required to attract a broader investor base. And while ELTIF uptake got off to a slow start, investors are now starting to become more aware of the opportunities available.
“We have been seeing good traction with new investors,” said George. “We are very supportive of the initiative and the benefits ELTIFs will bring to European investors and economies.
Read more: ELTIFs special report: The road to retail
“We expect them to continue to grow as more investors gain meaningful access to the benefits of allocating to private assets. However, this will not happen overnight; it will take time, sector-wide collaboration, and innovation, as new investment propositions normally do.”
Sam Boughton, director and head of EMEA, Moonfare, echoed these views, stating that there continues to be much excitement about ELTIF 2.0 among retail investors and fund managers.
“There are a lot of managers working on ELTIF 2.0 products,” said Broughton. “We are seeing a lot of interest from intermediaries such as banks, wealth managers, and independent financial advisor pools, who are looking to add ELTIFs to their product platform and bring private equity investing into their client portfolios.”
ELTIF 2.0 was launched on 10 January 2024, and contained significant regulatory updates designed to enhance liquidity, broaden investment opportunities, and simplify marketing, compared to the original ELTIF. The changes were made to make the investment vehicle more attractive to retail investors.
However, the new-look ELTIF got off to a slow start as fund managers were forced to wait for more than 10 months for the regulatory technical standards to be confirmed.
Melville Rodrigues, head of advisory – real assets at Apex, said that the introduction of these standards was a key moment for ELTIF fund managers.
“The market was awaiting clarity in particular on what would be the liquidity management tools which applied to the ELTIF 2.0, and those were clarified in October,” explained Rodrigues.
“These technical rules are welcomed.”
Rodrigues also expects to see more activity in the market in 2025, but added that the growth of the investment vehicle will be dependent on the opening up of distribution channels and demand from retail investors.
Read more: Amundi launches private markets ELTIF
“What I anticipate to be the focus is how the ELTIF 2.0 can operate within individual EU jurisdictions, especially from the point of view of distribution,” added Rodrigues.
“The issue of distribution is important in all markets.
“Furthermore, the success of ELTIF 2.0 will be aligned with investor confidence in wanting to invest in private assets.”
Justin Partington, group head of funds and asset managers at investor services firm IQ-EQ, agreed that “restrictive investment and distribution rules” have stymied the growth of ELTIFs.
“ELTIF 2.0 holds huge potential in democratising access to alternative investments, fostering greater participation from retail investors in long-term investment,” he said. “Reforms to the market mean that ELTIF volumes could reach €100bn by 2028, a substantial increase from €11bn in 2022. However, the real challenge lies in rethinking how fund managers engage retail investors. Only 16 per cent of retail investor AUM is in private markets, which represent 50 per cent of global AUM – despite impressive returns in this space over the past year. Smoothing out the investor journey, establishing the right technological platforms, increasing transparency, and simplifying the onboarding process are essential to facilitate greater participation in private markets.”
Despite these challenges, the consensus seems to be that 2025 will be the year of the ELTIF.
“We think there is a positive direction of travel in general on additional access to private markets,” said Boughton.
“It is early days in terms of uptake, but we believe the secular trend of access to the asset class is here to stay, and ELTIF will be a part of that.”
Read more: BNP Paribas: ELTIF 2.0 will drive growth in 2025
