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Are ELTIFs gearing up for a boon period?

Blackrock report expects market to grow 11 fold in the next five years


Pete Carvill

A report from Blackrock says that European Long Term Investment Funds (Eltifs) should experience ‘rapid growth’ in the next few years.

The 16-page report, ELTIFs: The quiet boom in EU wealth management, states that the market is estimated at having reached €10bn at the end of last year, with an additional €100bn in assets under management expected over the next five years.

The paper gives a number of reasons for this growth: diversification and portfolio resilience in the light of last year’s tumultuous markets, scalability, and new developments supporting growth such as the EC and the European Parliament’s voting in favour of new rules, which should come into application early next year.

The authors of the report wrote: “Taken together, we believe these enhancements will provide material improvements to portfolio construction, provide a positive investor protection framework, and will contribute to growth in the category as more investors embrace the vehicle.”

The report also names a number of advantages arising from Eltifs. These include being available to retail investors across Europe at low minimum investment levels, having fully funded and capital-call models, the ability to be marketed in non-EU countries under private placement rules, and being used as a tool of the EU to promote investment in infrastructure.

The authors wrote: “These benefits are generating a substantial uptick in overall interest. And there are new Eltifs being launched on a regular basis. Since 2015, the market has grown to 84 registered and marketed Eltifs.”

The Blackrock authors went on to offer some advice, particularly in the areas of education, taking a broader view, how sourcing is crucial for performance, the lifecycles of private markets, liquidity and clarity, and patience.

They wrote: “Distributing an Eltif is not like simply putting the next mutual fund on the recommendation list of a wealth manager and waiting for it to ‘roll’ off the shelf. Given the required time for the due diligence process, setting up the operational model, finalising the distribution agreement, partnering on marketing material and adviser education, the preparation for an Eltif distribution can take up to six months. Furthermore, this needs to be aligned with the fund-raising period of the Eltif which can take more than one year.”

They added: “From our vantage point, we see many encouraging signs that the obstacles that Eltifs have faced in the past are being addressed. With new features and political support, along with increased training, education, and overall comfort levels, Eltif adoption should accelerate in the coming years.”

Eltifs: The quiet boom in EU wealth management was written by West Lockhart, managing director, Emea head of wealth and family offices; Fablo Osta, managing director for Emea wealth and family officer; Alex Cunningham, director of Emea global product group; and Kal Aschick, vice president of the Emea wealth product group.