Luxembourg: Adoption Of The ELTIF Regulation

The proposed regulation (the "Regulation") on European Long-Term Investment Funds ("ELTIF") has been adopted by the European Parliament (the "EP") on March 10^th 2015.

As further described in a previous article, the aim of the Regulation is to encourage professional/institutional and retail investors to invest in long-term infrastructure projects.

Several points of the Regulation have been amended since submission of the first draft to the EP on April 17^th 2014 (the "Initial Draft").

The main amendment relates to the possibility for retail investors to ask for the redemption of their shares/units before the end of the life of the ELTIF. While the Initial Draft as amended by the EP was more open to this possibility, the Regulation now, in principle, prohibits early redemptions even for retail investors. The reason for this is that long term infrastructure projects require regular and stable financing which cannot be guaranteed in the presence of early redemption rights.

However, derogating from the general rule, ELTIFs may (but are not required to) offer the possibility for early redemptions if they comply with some additional requirements of the Regulation, such as establishing a liquidity management policy and limiting the amount of redemptions in a given period.

The units or shares of an ELTIF may be admitted to trading on a regulated market or a multilateral trading facility thus offering investors an alternative means of liquidity in the absence of redemption rights.

The Regulation is to be considered as being in its final form. The Regulation will now be submitted to the Council of the European Union for formal approval. It shall thereafter be published in the Official Journal of the European Union and enter into force twenty days after such publication which is expected to occur on or around the end of 2015.