The European Parliament has voted to allow the creation of European Long-Term Investment Funds (ELTIFs). The new vehicles are designed to make it easier for non-bank lenders to finance projects that benefit the economy of the political union.
The new structures are aimed at pension funds and insurance companies but will also be open to professional and retail investors. To enable retail investors to use the vehicle, redemption rules have been included to allow smaller investors to withdraw their commitments if the overall vehicle is liquid enough, a statement by the parliament said.
ELTIFs will be regulated under Europe’s AIFMD rules and must comply with a set of rules laid out by the European authorities. Investments made by the funds must channel financing towards infrastructure, intellectual property or research investments. The funds are designed to address the lack of bank lending to SMEs or open-ended research projects.
Commenting on the move, Monica Gogna, a partner in the investment management practice at Ropes & Gray said: “This move indicates Europe’s appetite to remain at the forefront of innovation for investment management. The development of this regulation and the implementing rules surrounding it, will definitely be ‘one to watch’ as the industry starts to map out opportunities where this new structure may be used.”