The European Commission (EC) has adopted the long awaited ELTIF 2.0 Delegated Regulation (RTS). Its version rejects a number of key proposals previously introduced by ESMA. In particular, the EC has returned to its original versions of Annex I and Annex II, with minor amendments.
As a result, liquidity parameters will be calibrated on the basis of a number of criteria and one of the following:
- the redemption frequency and the notice period of the ELTIF, as outlined in the three options of Annex I; or
- the redemption frequency and the minimum percentage of liquid assets (UCITS eligible assets), as outlined in Annex II.
Additionally, minimum holding periods will not be mandatory. Where ELTIF managers do implement a minimum holding period they will need to consider, amongst other things, the liquidity profile of the underlying asset classes, the ELTIF's investment policy and its investor base.
This is a very welcome development for managers considering the establishment of an ELTIF. It finally brings much needed clarity to ELTIFs that want to offer liquidity to investors. The adoption now launches a three-month scrutiny period for co-legislators. The RTS will be published in the Official Journal of the EU in Q4 2024 and will enter into force the day following its publication.
This blog forms part of a series of blogs on the development of ELTIF 2.0, available here.
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