Proposed EU retail fund gaining industry support

Private equity’s European trade body welcomed changes to a proposed long-term investment fund structure that would provide EU private equity firms access to retail investors.

The European Parliament voted for changes to the European Long-Term Investment Fund (ELTIF) structure last week that added “some much-needed flexibility”, according to the European Private Equity & Venture Capital Association (EVCA), which added that “further work is still needed” before the vehicle becomes an attractive proposition to private equity.

The ELTIF is a vehicle designed to accept commitments from both professional and retail investors, and will be available for GPs who become authorized under the Alternative Investment Fund Managers Directive (AIFMD).

The industry originally expressed concerns that professional and retail investors were required to invest in a one size fits all ELTIF structure – despite having different needs and investment expectations.

To address those concerns the European Parliament created separate professional and retail ELTIFs under the proposal, allowing GPs using the fund to disapply provisions meant for retail investors if they only wish to solicit professional investors. For instance, retail funds will have to publish a prospectus that complies with the EU’s disclosure regulation for retail investors, the prospectus directive, and publish a key information document.

The EVCA said the European Parliament’s changes are still lacking in one area: the creation of an “efficient framework” for the redemption rights of retail investors in ELTIFs. The EVCA wants policymakers to come up with a list of redemption policy tools ELTIF managers can use for retail investors, which the current proposal doesn’t allow.

The European Parliament’s report will now go to the Parliamentary Committee for a final vote before being signed off by the European Council.