Private credit ELTIF launches outpace private equity
Private credit has overtaken private equity as the preferred sector for new European Long-Term Investment Funds (ELTIF) launches, new research has shown.
According to data collated from Morningstar Direct, PitchBook, and the European Securities and Markets Authority (ESMA), as of 27 January 2025, private credit was the most popular asset class for ELTIF launches – outpacing private equity for the first time.
Infrastructure and multi-asset ELTIF launches also grew last year, while the number of real estate based ELTIF launches remained largely in line with the previous year.
Read more: Candriam and Kartesia launch private debt ELTIF
In a new report, Morningstar said that the recent growth of the ELTIF market is a vote of confidence. However, analysts noted that certain challenges remain.
“The convergence of private and public markets is expected to dominate asset management discussions in the coming years,” said Mara Dobrescu, director of fixed income ratings, Morningstar.
“Private markets demand a distinct skill set compared to traditional investments, and asset managers will likely need to scale up their capabilities significantly to deliver successful ELTIF products – which are finally picking up steam following recent regulatory changes.”
The data found that more new ELTIF products were authorised in 2024 than in the previous three years combined. This is likely due to the introduction of ELTIF 2.0 regulations, which have opened up the market further and improved the liquidity of the funds.
Read more: StepStone Group to launch ELTIF
Dobrescu said that when choosing to invest in an ELTIF, it is important to understand the fund’s underlying strategy, liquidity provisions, valuation process, and fee structure, as investors run the risk of overestimating the potential after-fee returns of ELTIFs while underestimating their liquidity risks.
“For investors, it is crucial to carefully assess the liquidity terms, the underlying strategy, and the track record of the manager when considering an ELTIF investment,” added Dobrescu.
“For instance, are they entrusting their capital to a good steward with an investor-friendly culture and practices, or a firm that has jumped on the bandwagon of the latest trend without much consideration?
“Investors also risk overestimating the potential after-fee returns while underestimating the liquidity risks of ELTIFs. While ELTIFs have their advantages, there is much for both investors and fund managers to be thinking about.”
Morningstar noted that the lack of disclosures across key dimensions such as team composition, portfolio holdings, investment process, and performance is another major challenge to overcome for advisors and fund selectors.
Read more: Muzinich & Co launches evergreen European private credit ELTIF
