The European Fund and Asset Management Association (EFAMA), the European Private Equity and Venture Capital Association (EVCA) and the Federation of European Securities Exchanges (FESE), three leading EU associations with members which actively promote the financing of long term investments, welcome the adoption by the European Parliament of its report on European Long-term Investment Funds (ELTIFs) on 17th April 2014.
“We welcome the flexibility added in the proposal and in particular, the following features:
A flexible regime as to the lifetime that allows the design of ELTIFs to be based on the concrete needs of investors and their investment strategy.
Inclusion of listed small and medium-sized enterprises up to 1 billion EUR market capitalisation in the scope of eligible investments. There are thousands of small and mid-cap companies listed on European regulated markets and multilateral trading facilities which are crucial to the economic recovery of Europe. They create the largest number of new jobs and the backbone of sustainable and dynamic long-term investment. They represent the type of activity that should be encouraged by the ELTIF proposal. Their size also allows for a lower liquidity than blue chip companies and they would greatly benefit from the new investment pools that the ELTIF proposal will create.
Additional flexibility for professional investors and enhanced status for semi-professional investors. Professional and retail investors have different needs and expectations when it comes to their investments; the creation of separate professional and retail ELTIFs will help in providing suitable investment vehicles for both categories by giving professional ELTIF managers the possibility to disapply the provisions that are fit mainly for retail investors. Moreover, the identification of the third category of semi-professional investors reflects the market needs of actors that currently have a greater interest in investing in long-term projects.
Maintenance of the “retail passport” for ELTIFs. The European Parliament report keeps retail investors in the scope of eligible investors in the ELTIF framework which is welcome and will help to maximise the pool of investors.
However, on a crucial point for investors, i.e. the right of investors in “retail ELTIFs” to redeem their shares prior to the end of the ELTIF’s lifetime, the European Parliament report does not create an efficient framework. This right should be left to the discretion of the ELTIF manager who should be provided with a list of available redemption policy tools while having the obligation to fully disclose the choice of these policy tools to the ELTIF investors. At the same time, the recognition by the European Parliament of the need to include redemption rights in the legislative text is a positive step which we hope will lead to a balanced redemption rights policy by the end of the legislative process.”
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