ESMA finalises technical standards under the revised ELTIF regulation

The draft regulatory technical standards (RTS) cover: 

• the circumstances in which the life of a European long-term investment fund (“ELTIF”) is considered compatible with the life cycles of each of the individual assets, as well as different features of the redemption policy of the ELTIF;
• the circumstances for the use of the matching mechanism, i.e. the possibility of full or partial matching (before the end of the life of the ELTIF) of transfer requests of units or shares of the ELTIF by exiting ELTIF investors with transfer requests by potential investors; and
• the costs disclosure.

The RST final report delineates the specific rules that are to be applied providing a detailed framework for aspects such us minimum holding period and maximum redemption frequency, choice of liquidity management tools, notice period and maximum percentage of liquid assets that can be redeemed.

ESMA has considered the feedback received from 23 stakeholders that responded to the last public consultation and agreed amendments. 

Minimum holding period:

ESMA suggest allowing the ELTIF manager to select the minimum holding period that is best adjusted to an individual ELTIF, based on criteria set in the RTS, and upon justifications to the competent authority. 

Maximum redemption frequency:

ESMA proposes to include a common standard (maximum quarterly redemption frequency), while allowing the ELTIF manager to deviate from it, upon justifications to the competent authority.

Choice of liquidity management tools: 

It is suggested the mandatory implementation of at least one anti-dilution mechanism (in addition to notice period), and redemption gates, while allowing the ELTIF manager to deviate from it, in specific circumstances, and upon justifications to the competent authority.

Notice period and maximum percentage of liquid assets that can be redeemed:

In addition to applying minimum percentages of liquid assets, depending on the length of the notice period, different percentages of maximum amount of liquid assets that can be redeemed are also applied. 

The final RTS seeks to reach a balance by proposing prescriptive rules, while allowing ELTIF managers to deviate from these under specific circumstances.

Next steps

ESMA submitted the draft technical standards to the European Commission for endorsement and final approval.

Further information:

Cristina Bonillo  

Senior Communications Officer
@ press@esma.europa.eu