Today, the European Commission published a legislative package aimed at revising the regulatory framework for managers of alternative investment funds (AIFMD)^[1] and European long-term investment funds (ELTIF Regulation)^[2].

Following dedicated consultations a year ago, the European Commission has submitted concrete recommendations for changes, which will be considered in the coming weeks by both the European Parliament and the Council of the EU, before trilogue negotiations may begin.

The proposal for a review of the AIFMD includes:

• Introducing new requirements for AIFMs of AIFs that perform loan granting activities;
• Ensuring the availability of liquidity management tools in exceptional circumstances;
• Further detail substance requirements (human and technical resources) and provide some new requirements in case of delegation (where managers delegate more portfolio or risk management functions outside of the EU than they retain, annual notifications by NCAs to ESMA of delegation arrangements with third country entities, peer review of application of the delegation regime);
• Postpone the concept of a depositary passport to a later stage.

It is worth noting that a number of proposals would also lead to changes to the UCITS Directive.

The review of the ELTIF Regulation aims primarily to increase the uptake of the ELTIF vehicle across the EU[3].

The European Commission addresses in the redrafted ELTIF Regulation restrictive ELTIF fund rules and barriers to entry for retail investors. It also distinguishes requirements for ELTIFs dedicated to retail and professional investors.

The proposed changes focus in particular on:

• Targeted changes to fund rules by:
  • Broadening the scope of eligible assets and investments;
  • Allowing for more flexible fund rules including fund-of-fund strategies.
• Reducing the unjustified barriers preventing retail investors from accessing ELTIFs, by:
  • Removing the 10,000 minimum investment threshold;
  • Removing the maximum 10% aggregate threshold requirements; and
  • Aligning suitability assessment with MiFID II rules.
• Whilst easing selected fund rules for ELTIFs distributed solely to “Professional Investors”.

ALFI, which participated in the previous consultations[4], will build up its position on the suggested changes in the weeks to come. The association is grateful to be able to source information and feedback from industry leading experts. Exchanges with other associations, authorities and regulators will also help to get a clear view on the specific implications of the draft directives and regulation, as well as subsequent compromise proposals and proposed amendments.