Regulation (EU) 2015/760 of the European Parliament and of the Council of 29 April 2015.

This foundational regulation establishes the rules that govern ELTIFs, ensuring they serve their purpose while protecting investors. The primary goal of this regulation is to foster long-term investments in sectors critical to the EU's economic development, such as infrastructure, real estate, and small and medium-sized enterprises (SMEs). By establishing a harmonized framework, the regulation allows ELTIFs to operate across the EU under a single set of rules, making them accessible to both professional and retail investors.

Eligibility and Authorization:

  • ELTIFs must be authorized by the competent authority in their home member state. Only EU-based Alternative Investment Funds (AIFs) managed by authorized Alternative Investment Fund Managers (AIFMs) are eligible to apply for ELTIF status.
  • The regulation requires detailed documentation for authorization, including the fund’s investment strategy, risk management practices, and the identity of the depositary.
Investment Rules:

  • ELTIFs are required to invest in long-term assets. These include equity or debt instruments issued by qualifying portfolio undertakings, real assets like infrastructure, and other collective investment undertakings that meet specific criteria.
  • There are strict diversification and concentration limits, particularly for ELTIFs marketed to retail investors. For example, an ELTIF can invest no more than 20% of its capital in any single qualifying portfolio undertaking or real asset.
Liquidity and Redemption:

  • ELTIFs are generally closed-ended funds, meaning that investors cannot typically redeem their shares before the end of the fund's life. However, Regulation (EU) 2015/760 allows for certain conditions under which early redemptions can be permitted, provided these are clearly outlined in the fund's rules and approved by the competent authority.
  • The regulation also allows for the possibility of secondary market trading of ELTIF shares, which can provide some liquidity to investors.
Transparency and Reporting:

  • ELTIFs are required to publish a prospectus that includes comprehensive information about the fund's investment strategy, risks, and fees. This ensures that investors are fully informed before committing their capital.
  • Regular reporting to both investors and regulatory authorities is mandated, providing ongoing transparency throughout the life of the fund.
Focus on Retail Investors:

  • The regulation includes robust measures specifically designed for retail investors. These measures include suitability assessments, clear disclosures about the long-term and illiquid nature of ELTIF investments, and the requirement to offer a "cooling-off" period during which retail investors can cancel their investment without penalty.
  • For ELTIFs marketed to retail investors, additional requirements ensure that these products are appropriately designed and distributed, taking into account the needs and circumstances of the target market.

We highly encourage you to review Regulation (EU) 2015/760, consult with a relevant fund manager, and check ELTIF-related materials prepared by the Association of the Luxembourg Fund Industry (ALFI) before proceeding with your investments.


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