The settled waters in the field of investment and funds could be stirred up in the next few years by the so-called ELTIF funds, which have undergone a new legal arrangement within the EU. This allows even small investors to enter the game, who are no longer limited in their initial investment. The acceleration of ELTIF funds has been excellent, within three months of the effective date of the legislative changes, their number has almost doubled. "ELTIF funds offer an alternative for those investors who are interested in investing and long-term appreciation of their money, and for whom bank products are not interesting and direct investments, even in minority positions, are too risky," explains the investor and one of the founders L/R/P attorneys Rastislav Roško.

From the new year, even small investors can enter some alternative funds. What was the purpose of this change within the ELTIF funds?

In January of this year, the regulation of the European Parliament and the Council of the EU regarding the change in the original legislation of European long-term investment funds, also referred to as ELTIF, entered into force. The original regulation, effective since 2015, aimed to make it easier for retail investors to invest in long-term non-bank products, thus ensuring an alternative non-bank source of financing for the economy. After eight years, however, the European Commission concluded that the intention had failed, as according to the available data, only 57 such funds had been created by the end of 2021. Moreover, they managed only a relatively small part of the capital compared to the total volume of capital in all funds outside the banking sector.

The new ELTIF 2.0 regulation thus aims to remove obstacles for retail investors' investments and increase the volume of resources managed by ELTIF funds. In this way, the advantages of these funds, which are uniform European identification, easier distribution across the EU and higher security for investors compared to ordinary alternative investment funds, could be more apparent.

Which funds can use the ELTIF label?

The designation ELTIF can be used by funds that receive permission to do so from the national regulator. Subsequently, approval in other European Union states is no longer necessary.

What are the other specifics of ELTIF funds?

ELTIF funds must meet the minimum requirements resulting from the regulation to guarantee the risk profile, the suitability for retail investors and the type of investment. I would divide the specifics of ELTIF funds into three groups, in terms of structure, investments, or assets, and method of distribution. In addition to a permit, such a fund must also have a depository and can only be managed by a licensed administrator. At the same time, ELTIF funds can invest in a limited type of assets, taking into account the restrictions regarding portfolio diversification and exposure. Last but not least, these funds benefit from European passporting and no additional permits are required for their distribution in EU member states.

You can find the full article in Hospodárske noviny: