On 23 May 2023, the European Securities and Markets Authority (ESMA) published a Consultation Paper on draft regulatory technical standards (RTS) supplementing the amended ELTIF Regulation (Amending Regulation), heralded as “ELTIF 2.0”. Responses are due by 24 August 2023, and the RTS are expected to be finalised by the time the Amending Regulation comes into force on 10 January 2024. The consultation follows the review of the ELTIF Regulation finalised in March 2023.

The Level 2 RTS under consultation will repeal, replace, and consolidate the original European Long-Term Investment Fund (ELTIF) RTS of December 2017. The main topics of interest are:

• an ELTIF’s redemption policy (including criteria for determining the minimum holding period when redemptions cannot be granted and redemption limits), liquidity management tools, and circumstances for the use of secondary market matching
• information to be disclosed to investors and to the member state regulators
• use of hedging derivatives
• disclosure of costs (including a requirement to disclose an overall ratio of the costs to the capital of the ELTIF)

In the consultation preamble, ESMA confirms that alternative investment fund managers (AIFMs) (whether of preexisting or new ELTIFs) can only take advantage of the revised rules from 10 January 2024, when the Amending Regulation comes into force — in other words, there is no earlier opt-in for preexisting ELTIFs.

This consultation landed the day before the European Commission’s proposals for retail investor protection, designed to ensure that retail investors in Europe receive the same treatment and protection regardless of which investment products, marketing, and distribution channels for private wealth they choose. The proposals include amendments to the Alternative Investment Fund Managers Directive (AIFMD) to ensure that undue costs are not charged, with proposed rules on pricing processes. If these proposals become law, managers of ELTIFs will have to take them into account alongside the changes in the consultation.

In this briefing, we have picked out some of the details in the proposed RTS that address some of the key gaps in the Amending Regulation. For background and insights into key features of the Amending Regulation itself, see our previous client alert ELTIF Reform: A Milestone in the Development of an EU Private Fund Structure for Accessing Wholesale Markets and our Spring Horizon Scan.