The EU regulates two main mutual fund types: UCITS (undertakings for collective investment in transferable securities, the most “popular” among EU individual investors) and AlFs (alternative
investment funds). AIFs are similar to UCITS but represent a more specialised, riskier category of mutual funds and are designed for a smaller, more affluent category of individual, nonprofessional (“retail”) investors in the EU.
AIFs are regulated through the Alternative Investment Fund Managers Directive (AIFMD) and are subject to the PRIIPs KID (packaged retail and insurance-based investment products’ key
information document) disclosure regime. European long-term investment funds (ELTIFs) represent a subset of AIFs. This fund category was designed by the EU to respond to a particular, less liquid, and under-funded market segment of private equity, property, and infrastructure projects. ELTIFs require a long-term (7 to 10 years) commitment from investors, are even less liquid, and have limited redemption possibilities. Adopting a very simplistic approach, it can be said that UCITS are intended for the vast majority of “retail” investors, followed by AIFs with a more restricted
universe of investors, followed by ELTIFs which can be considered the most “specialised” of all three.
The European Commission (EC) launched a public consultation on the European long-term investment funds (ELTIFs).
Amongst others, BETTER FINANCE asks policymakers to apply the UCITS disclosure regime to ELTIFs for those distributed to retail investors, recommends the application of less stringent MiFID II investment restrictions for qualified non-professional investors, and to grant ELTIFs the most favourable tax regime for “retail” investment products investing in illiquid assets in every EU Member State.
Read the full response below.