ELTIFs: Alternative investments for investors with small investment amounts and higher risk. Discover the opportunities and challenges of European long-term funds.

ELTIFs: Alternative investments for investors with small investment amounts and higher risk. Discover the opportunities and challenges of European long-term funds.

According to a report from www.capital.de, major investors also like to invest their money away from the trading floor. This world is also open to small savers through so-called European Long-Term Investment Funds (ELTIFs), albeit at a higher risk. ELTIFs make it possible to invest even with small amounts in unlisted companies, which often promise attractive returns.

The reform, which will come into force on January 10, 2024, is intended to stimulate demand for ELTIFs and expand the product range. The reform eliminates the mandatory minimum investment of 10,000 euros for investors and the limit of a maximum of ten percent of net assets in ELTIFs. In the future, providers will be allowed to invest up to 45 percent of their assets in liquid investments. This means that similar rules will soon apply to ELTIFs for sale as to ordinary mutual funds.

The number of approved ELTIFs increased from 54 in 2021 to around 100 offerings on the market. According to a study by Scope, the volume of the European market for ELTIFs could increase to up to 35 billion euros annually by 2028. The reform could also stimulate real estate investments, as the range of possible real investments increases and ELTIFs are allowed to take on more debt capital.

However, ELTIF investments are also associated with increased risks, as capital once invested is tied up for the long term and an early exit is often only possible via secondary markets with discounts. Investor protection will be diluted by the reform, as fund-of-funds constructs are also permitted, which could make product preparation less transparent.

Overall, the reform and increasing demand could expand the product offering for ELTIFs and make distribution easier for banks and other financial service providers. However, investors should keep in mind the higher risks and limited liquidity of ELTIF investments.