Risk Diversification for Private Investors
The goal of ELTIF is twofold: to provide private investors access to alternative investments, which are generally less volatile than stock investments, and to finance the European “Green Deal,” infrastructure, and digitization.
Previous Market Uptake of ELTIF
Until now, ELTIF has been in kind of a dormant state, attributed to several factors, including the high financial entry barrier for investors with a minimum investment amount of €10,000, broad investment restrictions on the provider side, and complicated advisory requirements for distribution.
Hurdles Eliminated
With the new reform, some of these requirements are eliminated. While in 2021, only about €2.4 billion was invested in 57 approved ELTIFs, investments grew to just over €11 billion in 77 available funds in 2022. According to ESMA, three months after the reform’s release in July 2023, 95 ELTIFs were already approved.
Until the implementation of the reform on January 10, 2024, and beyond, additional ELTIFs are expected from German and international asset managers, alternative asset managers, and banks.
ELTIF 2.0 as the Leading Vehicle for Private Investors
From the perspective of asset managers, banks, and other advisors, ELTIFs are practically the only investment instrument that enables scalable, cross-border distribution of private market investments in Europe.
While the ELTIF’s distribution was previously hindered by complex advisory barriers and manual document processing, this is now significantly eased through reduced MiFID II-compliant advisory and new digital options for distribution and processing.
Leading providers emphasize these structural advantages of ELTIFs when incorporating the new funds into their offerings. Similar to how UCITS funds have established themselves as the instrument of choice for public capital market investments, ELTIFs could become the preferred vehicle in the private markets.
More information on ELTIF in the Scope Group study: https://lnkd.in/eySk3MbZ