The European Union’s regulation on European Long Term Investment Funds (Eltifs) comes into effect this Wednesday in what amounts to the first main development of the European Commission’s Capital Markets Union (CMU) initiative.
Eltifs are seen as a way for fund managers to start offering money lending services as an alternative to banks.
Along with other developments under the CMU, the aim is to stimulate the economy by making capital more easily available for companies – especially for small to medium size enterprises – and for investment into infrastructure.
Fund groups have been eagerly awaiting the arrival of the legislation for some time.
The need for alternative sources of lending has arisen due to government budget constraints and to the impact of higher capital and liquidity requirements on banks, which have reduced lending.
Silke Bernard, a lawyer with global law firm Linklaters in Luxembourg, says that Eltifs are an important tool in the “armoury” of EU leaders in their efforts to give the continent’s economic recovery new impetus.
She adds that it is also an opportunity for Luxembourg to consolidate and extend its role as a major European centre for cross-border funds.
Similarly, Ireland is interested in developing the Eltif project within its own funds industry. In response to EU consultation on the Eltif, the Irish Funds, the industry association, has called for Eltif rules about hedging, valuation and cost disclosures to align with existing fund regulations, such as Ucits and the Alternative Investment Fund Managers Directive.
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