In particular, the ELTIF RTS set forth more precise requirements on ELTIF redemption policies and liquidity management, including guidelines on maintaining minimum liquid assets and handling unit/share transfer requests, as well as cost disclosure elements.
Luxembourg has been the domicile chosen by the majority of asset managers for the use of this fund regime. The Commission de Surveillance du Secteur Financier, the Luxembourg regulator, promptly updated its ELTIF application questionnaire to align with the RTS requirements, making it mandatory for all new applications and emphasizing detailed liquidity disclosures.
For any questions on navigating the new ELTIF RTS requirements or adapting existing strategies under the ELTIF 2.0 regime, our experts are available to assist with tailored guidance and support.
Key takeaways
The RTS provisions aim to strengthen transparency, streamline compliance and enhance liquidity management for ELTIFs under the revised ELTIF 2.0 framework.
Hedging risks
The RTS outline that financial derivative instruments should be used solely for hedging the risks inherent in other investments of the ELTIF. The instruments must effectively reduce the risk concerned, and this reduction should be verifiable.
Redemption policy and liquidity management
The manager of an ELTIF must ensure that the life of the ELTIF is compatible with the lifecycles of each of its individual assets. This includes considering the liquidity profile of each asset, the timing of acquisition and disposal, and the redemption policy.
Methods for determining the minimum percentage of liquid assets required to meet redemptions are specified.
Managers must calibrate these percentages based on the redemption frequency and notice period.
Minimum holding period
For open-ended ELTIF, the RTS do not specify the length of the minimum holding period but require the manager of the ELTIF to determine it based on certain criteria. These include the long-term nature and investment strategy of the ELTIF, the liquidity profile of the underlying assets, and the investor base.
Transfer of units or shares
The RTS specify the requirements for matching requests to transfer units or shares of the ELTIF between investors. These include the format, process, timing and frequency of the matching window, as well as the criteria for determining the execution price, costs and fees, if any.
Valuation of assets
The manager of an ELTIF must start the valuation of the assets to be divested before the deadline and finalize it no later than six months before that deadline. The valuation should be carried out sufficiently close to the beginning of the disposal of the assets.
Costs disclosure
The RTS specify the common definitions, calculation methodologies and presentation formats of costs. These include the costs of setting up the ELTIF, the costs related to the acquisition of assets, management and performance-related fees, distribution costs and other costs.
Application requirements
The Luxembourg regulator, the Commission de Surveillance du Secteur Financier (CSSF), has updated its ELTIF application questionnaire, now mandatory for new applications. The CSSF emphasizes that the questionnaire must be carefully completed and that each ELTIF prospectus should clearly outline liquidity arrangements in accordance with the ELTIF RTS.
Legacy ELTIFs
ELTIFs authorized before 10 January 2024 that opt to remain under the former regime will continue to follow the original Delegated Regulation (EU) 2018/480.
