EUROPE: European Commission Propose New Investment Fund Framework

Friday July 11 2014

The European Commission has proposed a new investment fund framework designed for investors who want to put money into companies and projects for the long term. These private European Long-Term Investment Funds (ELTIFs) would only invest in businesses that need money to be committed to them for long periods of time. The proposal will be presented to the Heads of State and Government at the upcoming European Council (27/28 June) where long-term financing of the real economy is on the agenda.

The new Funds would be available to all types of investor across Europe subject to certain requirements set out in EU law. These requirements include the types of long-term assets and firms that the ELTIFs are allowed to invest in, how they have to spread their money to reduce risks and the information they have to give to investors. Any ELTIF manager would also have to comply with all of the stringent requirements of the Alternative Investment Fund Managers Directive (AIFMD) to provide adequate protection for its investors.

Under the proposal, ELTIFs would have to meet a set of common rules so that they:

• always have a depositary to keep assets safe;
• comply with rules on spreading assets to prevent too much money going into one asset;
• only use derivatives to manage currency risks in relation to the assets they hold, and not for speculation;
• and obey limits on the amount they can borrow.

Click on the above link for further details.