Since its creation in 2015, the ELTIF, or European Long-Term Investment Fund, aims to bring together capital from professional and retail (private) investors to finance long-term investments in Europe's real economy, such as energy, transport, social infrastructure and job creation. Against a backdrop of economic transition, ambitious climate targets and the partial withdrawal of banks from long-term financing, this vehicle offers an attractive alternative, particularly for private debt funds.
A reform to remove the brakes of the past
The 2023 reform, which came into force in 2024, greatly modernised the scheme giving rise to ELTIF 2.0, which marks an important stage in the democratisation of this investment vehicle. The main objective of this reform was to address the limitations identified in ELTIF 1.0, whose overly rigid framework had curbed the appetite of asset managers and investors alike.
The main changes introduced by the reform are notable:
- Abolition of the minimum investment ticket of 10.000 euros for non-professional investors, thus opening up access to a broader investor base;
- Broadening the range of eligible assets, in particular to private debt (financing, syndicated bank loans, mezzanine debt), but also to physical assets such as sustainable infrastructure, telecoms networks or renewable energy facilities;
- Easing of diversification and liquidity rules, making it easier to structure portfolios aligned with market realities;
- Admission of fund of funds structures, allowing better risk pooling and smoother access to pan-European strategies.
These developments make ELTIF 2.0 a much more flexible vehicle, without losing its regulated and secure framework for professional and retail investors.
A tailor-made tool for debt funds
In a transforming financial landscape, private debt funds are experiencing exceptional growth, due in particular to the increased need for alternatives to traditional bank financing, particularly for financing the expansion of European companies' activities, combined with strong demand from professional and private investors for strategies that generate stable returns over the long term.
In a transforming financial landscape, private debt funds are experiencing exceptional growth.
ELTIF 2.0 is emerging as the investment vehicle for structuring investment funds with a diversified strategy while offering a secure regulatory framework for professional and private investors. Firstly, for fund managers, it is an opportunity to raise capital in a harmonised format, thanks to the European passport for marketing the vehicle. By offering regulated access to assets previously reserved for institutional investors, it also gives private investors access to alternative investment strategies that were closed to them in the past. Lastly, ELTIF 2.0 is a powerful lever for long-term financing in European companies and particularly in strategic sectors such as energy, infrastructure or green technologies.
A dynamic to be followed closely
At the crossroads between long-term financing, the appeal of alternative assets and the opening up to retail customers, ELTIF 2.0 has the wind in its sails. However, its success will depend on a number of factors: the ability of fund managers to propose appropriate strategies, transparency regarding cross-border distribution policy and, above all, education of non-institutional investors.
ELTIF 2.0 is emerging as the investment vehicle for structuring investment funds with a diversified strategy while offering a secure regulatory framework for professional and private investors.
But the signals are there: several big names in investment fund management have already set up ELTIF 2.0 vehicles from the first quarter of 2024. This growth has been sustained throughout 2024 and looks set to continue into early 2025. Indeed, this hybrid model, which combines regulatory rigour, security, operational efficiency and access to opportunities long reserved for a limited handful of players explains its growing success.