Regulatory News Alert
We would like to inform you that the three-month scrutiny period by the co-legislators after the adoption of the delegated act (amended RTS) by the European Commission ended on the 21st of October. The text is expected to be published in the Official Journal imminently and expected to enter into force on the same day of publication to avoid any further delays.
The key points from the adopted Regulatory Technical Standards (RTS) are as follows:
1. Optional minimum holding period: The RTS confirm that applying a minimum holding period is not mandatory. ELTIF managers have the discretion to determine whether to apply one and for how long, depending on the specific structure and investment strategy of the ELTIF.
2. Redemption flexibility and calibration: The RTS provide significant flexibility in how managers handle redemptions. There is no mandated 12-month notice period for redemptions. Instead, managers must calibrate the maximum size of redemptions using two possible approaches (Annex I or Annex II).
These options base redemption sizes on UCITS-eligible assets and expected cash flows, giving managers more control over liquidity while accommodating different investor needs.
3. UCITS-eligible asset requirements: Two models are offered for managing UCITS-eligible assets:
Annex I: Does not require maintaining UCITS-eligible assets outside of redemption periods, offering flexibility for managers.
Annex II: Requires a minimum percentage of UCITS-eligible assets to be maintained, even outside redemption days, ensuring liquidity thresholds are met.
4. Shorter notice periods: If an ELTIF manager proposes a notice period of less than three months for redemptions, they must inform the relevant regulatory authority and provide a rationale demonstrating that this shorter period aligns with the ELTIF’s specific characteristics.
5. Liquidity management tools: The RTS give managers discretion over the use of liquidity management tools such as anti-dilution levies, swing pricing, and redemption fees. These tools are not mandated but can be employed to safeguard fund stability and ensure fair treatment of investors.
The adopted RTS introduce a greater degree of flexibility for ELTIF managers, allowing them to better tailor their funds to meet the needs of different investors while ensuring operational efficiency. With the removal of rigid requirements, such as a mandated notice period, and the introduction of flexible liquidity management tools, ELTIFs are now positioned to be more attractive and adaptable in the evolving investment landscape. These changes are expected to come into force in Q4 2024.
As ELTIF 2.0 redefines the European investment landscape, asset managers are navigating an evolving regulatory environment filled with new opportunities and challenges.
Deloitte stands ready to assist you in this transition by providing comprehensive support tailored to your needs. We help you develop competitive product strategies that align with the new framework, ensuring your offerings meet market demands while complying with regulatory standards. Our team guides you in adapting your operating models to handle the complexities of open-ended structures, enhancing liquidity management, and streamlining operational processes.
We also offer expertise in optimizing your distribution and marketing efforts, leveraging the expanded cross-border opportunities presented by ELTIF 2.0. By strengthening your existing operating models, internal control functions of risk management and compliance, we ensure you can meet heightened regulatory requirements with confidence. From strategic planning to operational execution, Deloitte provides the insights and solutions necessary to thrive in this new era of long-term investing.