“Eltifs: the quiet boom in EU wealth management,” BlackRock highlights the continuing success of European Long Term Investment Funds (Eltifs). Eltifs are funds that invest in assets such as energy and communications infrastructure, transport, public buildings or social infrastructure, and can be distributed across borders. Between 2015 and now, 84 have been registered and marketed.

Eltif regulation was introduced in 2015 by the EU, to help fund the union’s digital, social and sustainable transition. In February 2023, the European parliament making these funds more attractive to managers and investors, thanks to a broader scope of eligible assets.

Potential for investor protection framework

Compared to the growth between their launch in 2015 to the end of 2022--around €10bn in AuM--and the expected growth over the coming 5 years--€100bn--it is clear, for BlackRock, why the Eltif “is quickly becoming the vehicle of choice in Europe.” Part of the growth is attributed to the generally growing attractiveness of private markets in the eyes of investors keen to diversify their portfolio.

“From the perspective of European wealth managers, Eltifs provide virtually the only scalable vehicle capable of distributing private markets to retail investors across borders within Europe,” says the report, adding that just like Ucits became “the go to vehicle for wealth managers distributing public markets,” Eltifs may become “the preferred vehicle for the distribution of private markets.”

Between the newest amendments to the regulations and the efficiency of the Eltif structure, “we believe these enhancements will provide material improvements to portfolio construction, provide a positive investor protection framework, and will contribute to growth in the category as more investors embrace the vehicle,” says BlackRock.

Lessons for the journey

It will be important to consider that Eltif advisors and retail clients will need a significant amount of training and education to fit private markets products into portfolios, advises BlackRock, adding that wealth maagers will need to look at private market investments “not as a single product based on its own merits” but also about the overall allocation to private markets.

“Properly position the topic of liquidity with clients to provide transparency and avoid potential misunderstandings of how much liquidity clients can expect from their Eltif investments,” it also says, reminding in passing that setting up an Eltif distribution is also a long-term effort due to the due diligence process among others.

However, in its final verdict, BlackRock--one of the biggest global asset management firms--says: “With new features and political support, along with increased training, education, and overall comfort levels, ELTIF adoption should accelerate in the coming years.”

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