A brief update European Long Term Investment Funds and news from the IP Real Estate Global Awards
European Long Term Investment Funds (ELTIFs)
The EU regulations for the establishment of European Long Term Investment Funds (ELTIFs) were published in the Official Journal of the EU on Tuesday. The text can be found here.
We commented on some of the peculiarities of the proposals in a newsletter last December, which can be found here.
These ambiguities remain.
- The regime is a regulatory framework rather than a specific form of vehicle. Without further provisions the legal form, tax status etc will depend upon the structure and jurisdiction selected by the manager. The regime does not therefore bring any tax incentives.
- The original proposals suggested a more favourable treatment for investors under the Solvency II rules (insurance companies) and IORP (pension funds). This was never particularly logical and has now disappeared. The capital charge element has gone from IORP too, so this is no longer a particular consideration for pension funds. Further twists can be anticipated on the Solvency II treatment. As we reported in March (see here), the European Commission had formally written to the European Insurance and Occupational Pension Authority (EIOPA) asking for technical assistance in introducing new (presumably more favourable) risk calibrations for infrastructure. In the current work plan for EIOPA (reduced by budget cuts), a reply to the Commission is scheduled for the 3rd quarter of this year. It looks as though the calibration changes, if any, will be in the underlying assets rather than introducing a favourable treatment for ELTiFs.
- For a fund marketed to institutional investors, there is no obvious reason for using an ELTIF. It imposes additional obligations over and above AIFMD without any obvious benefits. Although the regulation states "EU AIFs that do not wish to market themselves as ELTIFs should not be bound by these rules, thereby also accepting that they do not benefit from the advantages that ensue", it is not immediately obvious what those benefits might be. Unlike an AIF, the ELTIF can however be marketed to individual investors.
We will continue to update you on this as it develops.
IP Real Estate Global Awards
These took place in the wonderful city of Copenhagen* on Tuesday. John was again chairman of the judges. Congratulations to the Canada Pension Plan Investment Board (CPPIB) who once again won Best Global Real Estate Investor and to all t
he other winners. Details can be found here
along with reports from the conference that takes place before the awards dinner.
* Copenhagen is a very civilised city and has a choice of cycle paths from the airport to the city centre. John takes his Brompton with him on overseas trips.
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