On 8 June 2016, the European Securities and Markets Authority (ESMA) published its Final Report and draft Regulatory Technical Standards (RTS) for Regulation (EU) 2015/760, the European Long-Term Investment Fund Regulation (ELTIF).

The ELTIF Regulation allows investors to put money into companies and infrastructure projects for the long term and aims to increase the amount of non-bank finance available for companies investing in the EU’s real economy. An ELTIF is a type of Alternative Investment Fund (AIF) which must be managed by an authorised AIF Manager under the AIFM Directive. By complying with the additional ELTIF requirements, the fund managers will have access to investors across the EU, including retail investors (subject to specific conditions).

• The criteria to determine the circumstances in which financial derivatives are used solely for hedging purposes, based on those set out in the ‘CESR guidelines on Risk Measurement and the Calculation of Global Exposure and Counterparty Risk for UCITS on risk measurements’;
• The life of an ELTIF should be determined with reference to the individual asset within the ELTIF portfolio which has the longest investment horizon;
• A non-exhaustive list of the types of market risk ELTIF managers should take into account when assessing the market for potential buyers ahead of the disposal of their asset;
• The criteria for the valuation of the ELTIF assets ahead of their divestment which specify the timing of the valuation and allow for valuations made under the AIFM to be taken into account; and
• A grandfathering provision, whereby ELTIFs have one year after the RTS come into force to comply with these rules.

Following discussion with the European Commission ESMA is postponing the delivery of its ELTIF RTS on the cost disclosure information which must be included in the ELTIF’s prospectus, in order to take into account the work being undertaken on cost disclosures for PRIIPs.

For a copy of the Final Report please see here.