Contributing Firms:
What potential do you see for the revamped ELTIF? Are you seeing increased interest and activity around ELTIFs from clients/investors as the early 2024 implementation date nears? How well is Ireland positioned to benefit from any increased industry activity in the updated product?

Meliosa O’Caoimh, Country Head, Ireland, Northern Trust: ELTIF 2.0 regulation (effective 10 January 2024) is a welcome change. It broadens the scope of eligible assets and permissible investments, and managers will be able to invest in a broader range of real assets. It also expands the scope for investment in other funds to include UCITS funds and EU AIFs with an EU AIFM and allows for master feeder ELTIFs.
Meliosa O Caoimh
Meliosa O Caoimh

This expansion will allow for more effective fund of fund strategies, faster deployment of capital and for reinvestment of excess cash into a broader range of funds to mitigate cash drag. The portfolio composition and diversification rules will be relaxed, allowing for more investment in large scale projects, which has the potential to contribute to the achievement of the European Green Deal.

At an investor level, ELTIF 2.0 upgrades and enhances the marketing and distribution rules and ability to offer investors redemptions during the life of the fund (Semi-Liquid Evergreen ELTIFs). It also recognises that retail investors and institutional investors have different time horizons, risk tolerances, investment needs and capabilities to analyse investment opportunities. It also provides for the relaxation of certain rules where the ELTIF is offered solely to professional investors.

And yes, we are seeing increasing interest from our client base to offer ELTIF 2.0 structures in 2024. The ability to offer a semi-liquid evergreen ELTIF arrives at the same time as a broader trend for having some liquidity in private credit strategies has become established. This has resulted in managers developing a track record of constructing portfolios with sufficient liquidity and building the operational capabilities to offer periodic redemptions. Northern Trust is actively working across our Luxembourg, Ireland & UK locations to support managers looking to launch semi-liquid vehicles 2024.

Regarding Ireland’s positioning, on 1 November 2023, the CBI published CP155. This sets out the CBI’s proposal to introduce a new standalone Chapter 6 within the CBI’s AIF Rulebook, to support the establishment and authorisation of ELTIFs in Ireland. The publication of CP155 is welcomed and highlights the CBI’s constructive steps towards ensuring that Ireland will be ELTIF-ready come January 2024.

Mark White, Partner and Chair, McCann FitzGerald LLP: Unlike AIFMD II, which has relatively little teeth (with the exception of a proposed new loan origination regime), ELTIF 2.0 is generally regarded as something of a potential game-changer in the private funds market in Europe.
ELTIFs are EU alternative investment funds (AIFs), managed by alternative investment fund managers (AIFMs), that invest in long-term investments, such as social and transport infrastructure projects, real estate and SMEs.
Mark White
Mark White

ELTIFs are the only type of EU domiciled funds dedicated to long-term investments that can be distributed on a cross-border basis to both professional and retail investors. This is in contrast to AIFMD, where a passport extends to professional investors only. As a result, ELTIFs are seen as a way in which the private funds market may be democratised, enabling retail investors access to long-term, illiquid, investments, such as social and transport infrastructure, credit, real estate and SMEs.

However, since the adoption of the original ELTIF framework in 2015 only a few ELTIFs have been launched. The European Commission launched a public consultation to understand the reasons behind the slow uptake in ELTIFs. Based on this consultation, the Commission noted that fund managers broadly agreed that the key deficiencies of ELTIFs lay in the limited scope of eligible assets and investments, as well as the barriers investors faced in accessing ELTIFs.

On this basis, the Commission proposed revisions to the ELTIF framework in the form of an amending Regulation on 25 November 2021. This amending Regulation entered into force on 9 April 2023 and will apply from 10 January 2024.

The new ELTIF framework (or ELTIF 2.0, as it has become known) has a number of advantages over ELTIF 1.0 in two key respects, namely: (1) ELTIF 2.0 significantly expands the scope of eligible assets and investments which an ELTIF can invest in to improve the attractiveness of the framework and (2) on the distribution side, ELTIF 2.0 removes a number of barriers to entry for investors that existed under ELTIF 1.0.

On this basis, the revisions to the ELTIF framework are to be welcomed and will provide scope and opportunities for fund managers to present an attractive new product to retail clients, in particular, with long-term investment strategies.

There is enormous interest in ELTIF 2.0 and it’s very likely that most private funds managers will wish to have an ELTIF product in their stable to be able to offer to both retail and professional investors. In line with most other EU domiciled funds, it is expected that Ireland and Luxembourg will be seen as the two most attractive domiciles for ELTIFs, given the tried and tested pan-European distribution platforms that these two jurisdictions already have in place for other fund products. The likelihood of a successful introduction of ELTIF 2.0 into Ireland is underpinned by the Central Bank’s stated aim of ensuring that Ireland is open for business, with an ELTIF authorisation infrastructure in place in January 2024. This is hugely welcomed by the Irish funds industry. We, and others, are already seeing considerable interest from managers who are actively assessing the possibility of establishing their ELTIF products in Ireland.
Cian Higgins
Cian Higgins

Cian Higgins, Head of Quantitative Solutions, Mazars: ELTIF 2.0 introduces several changes from its predecessor. Two of the biggest are aimed at broadening the range of eligible investments and eliminating the minimum investment barrier. These modifications are expected to generate heightened interest in the product’s second iteration, especially due to the removal of the minimum investment barrier, which opens doors for a wider array of “real” retail investors.

Presently, there are fewer than 100 existing ELTIF 1.0s, and none are domiciled in Ireland. However, Ireland stands poised as an attractive domicile for the revamped product. Several factors contribute to this favourable position. Firstly, Ireland boasts an extensive global reach within the funds industry, ranking as the second-largest domicile in Europe for investment fund assets.

Additionally, the country’s well-established market, built over the last 30 years on a foundation of trust and innovation enhances its appeal. Ireland also benefits from a robust and transparent regulatory framework maintained by the Central Bank of Ireland (CBI). Notably, the CBI is not proposing additional rules on Irish ELTIFs which will certainly be an attractive feature.

These reasons are sure to contribute to further solidifying Ireland’s position as a preferred domicile for the second iteration of ELTIF.

Fergus McNally, Partner, EY: There is a marked increase in interest in the ELTIF. The revamped regulation broadened the scope of eligible assets, and rules around distributing and marketing to investors.

We see it as a key piece of regulation in driving the EU’s aims to fund the green transition, and for wider adoption of retail investment. It’s very welcome that the Central Bank has made constructive steps towards ensuring that Ireland will be ELTIF-ready come January 2024, and Ireland be ready to drive any growth in the asset class.