September 26, 2023

The ELTIF (European Long Term Investment Fund) structure, came into force in 2015 with the main objective of raising and channelling capital towards European long-term investments such as real estate projects and SMEs, resulting in the realisation of private funds in the EEA.

Despite its good intentions, the initial launch of the ELTIF was not successful mainly due to the restrictions in the investment strategy and the amount of time required to hold the investment: in fact during the past 8 years only 84 ELTIFs have been created in the entire EEA notwithstanding the fact that ELTIF is a harmonised product and can be passported and hence marketed across the EU member states.

Since then the original regime was revamped, giving way to the ELTIF 2.0 in early 2023, with its provisions being applied in January 2024.  The new regulation contains enhancements to the ELTIF 1.0 bringing new opportunities to the investment fund industry and simplifying the conditions for investments in real assets, new eligible investments and investment strategies.


What changed?

While the ELTIF 1.0 considered only European projects as eligible investments, this is no longer the case with ELTIF 2.0, rather extending its reach to include investments located outside the EU. The ELTIF 2.0 can be marketed both to Retail and Professional Investors, and goes a step further, whereby those ELTIFs marketed exclusively to Professional Investors will have less restrictions in terms of diversification requirements, leverage and will be permitted to make investments in other funds.

Retail Investors now benefit from a number of reforms such as the minimum investment requirements, the early redemption, an increased borrowing threshold,  additional investor protection mechanisms and further diversification rules.

This long-awaited amendment has been positively received by Investment Managers too: from their end, the ELTIF 2.0 amongst other assets also considers Green Bonds as eligible investments (which is currently a hot topic amongst policy makers), FinTech assets and "fund of funds" strategies, which was not possible under the previous regime.

Why Malta?

Malta is an ideal alternative EU jurisdiction for an ELTIF to be domiciled in: this fund still requires an AIFM and a Depository and a Fund Administrator similar to Alternative Investment Funds (AIFs) which are accessible in Malta at perhaps a more competitive rate than other jurisdictions whilst not compromising on quality.

The Maltese regulator (MFSA) has a pro-business approach, which will facilitate the licensing process whilst ensuring sound due diligence ascertaining peace of mind to the investors.

Malta recently embarked on a strategy to further strengthen its position and performance in a professional and regulatory compliant manner to offer prospective stakeholders looking to create ELTIFs or any other type of Fund in Malta a professional outlet of the highest quality service.