European Long Term Investment (ELTIFS) Fund Regulation Commission legislative proposal Regulation General Approach Agreed Trilogues commence

June 2013 June 2014 Q4, 2014

Latest news:

On 17 April 2014, the European Parliament adopted amendments to the proposal for a Regulation as set out in the to this dossier.

Parliament’s statement

. The proposal was sent back to the Economic and Financial Affairs Committee (ECON) for reconsideration with the vote postponed to a future plenary. Rodi Kratsa-Tsagaropoulou, MEP (GR, EPP) author of the European Parliament’s report on ELTIFs was not re-elected in the 2014 EP elections. A new rapporteur Jeppe Kofod (S&D, DK) has been assigned The Greek Presidency secured a General Approach with the Council on this dossier on Tuesday, 25 June 2014; having negotiated a compromise on the remaining outstanding issues (how to deal with the marketing of the funds to retail investors and the investor protection rules that should apply).

The Italian Presidency expects to begin trilogues with the European Parliament from October 2014.

Overview

On 26 June 2013, the European Commission adopted a proposal on a Regulation for European Long Term Investment Funds (ELTIFs). Linked to the Green Paper on Long-Term Financing, the proposal aims to increase the pool of available capital for long term investments in the EU economy. ELTIFs would invest in illiquid assets which are difficult to buy and sell and 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 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 borrow.

The General Approach agreed in June 2014 sets out the: Description of the product: An ELTIF will be an Alternative Investment Fund (AIF) with an Alternative Investment Fund Manager (AIFM) authorised under AIFM Directive. The ELTIF will have a European passport with an ELTIF label.

Structure: Closed ended with a primary objective to invest in long-term illiquid assets, e.g. infrastructure projects Loan origination: Permitted without restriction to portfolio undertakings.

No additional rules apply to this type of investment.

Leverage: An ELTIF may borrow up to 30% of its capital but cannot use this to make loans. Derivatives may only be used for hedging purposes.

Permitted investors: Professional and retail investors. An ELTIF which markets to retail investors is subject to a number of additional requirements including the obligation to publish a Key Information Document.