| Author (Corporate) | European Commission |
|---|---|
| Series Title | COM |
| Series Details | (2013) 462 final (26.6.13) |
| Publication Date | 26/06/2013 |
| Content Type | Policy-making |
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Long-term investment is the provision of long-lived capital in order to finance tangible assets (such as energy, transport and communication infrastructures, industrial and service facilities, housing and climate change and eco-innovation technologies) as well as intangible assets (such as education and research and development) that boost innovation and competitiveness. Many of these investments have wider public benefits, since they generate greater returns for society as a whole by supporting essential services and improving living standards. This proposal intends to help increase the pool of capital available for long term investment in tomorrow’s economy of the European Union with a view to finance transition to smart, sustainable and inclusive growth. This will be done by creating a new form of fund vehicle, EU Long Term Investment Funds or ELTIFs. ELTIFs, by virtue of the asset classes that they are allowed to invest in, are expected to be able to provide investors with long term, stable returns. Eligible assets would be qualified as forming part of ‘alternative investments’ – asset classes that fall outside the traditional definition of listed shares and bonds. While alternative investments comprise real estate, venture capital, private equity, hedge funds, non-listed companies, distressed securities and commodities, ELTIFs would only focus on alternative investments that fall within a defined category of long-term asset classes whose successful development requires investors’ long-term commitment. Therefore, real estate, unlisted companies or infrastructure projects would be eligible while commodities would not be. There is a clear need therefore to ensure that barriers to investment with a long term perspective are tackled at the European Union level. This is particularly the case for assets such as infrastructure projects that depend on long term commitments. These assets depend, in part, on what is often called 'patient capital'. This kind of investment may not be able to be redeemed for a number of years but are invested in such a way as to be able to provide stable and predictable returns. Infrastructure projects, investments in human capital, or operating concessions would fit this description. Capital invested in this long term, 'patient' manner benefits the real economy by providing predictable and sustained flows of finance to firms and creates employment. The wider context of this work has been set out in the European Commission's Green Paper, the Long-Term Financing of the European Economy, outlining supply and demand-side issues across all financing structures. The Green Paper also confirmed the need for measures on investment funds, as outlined in this proposal, whilst concentrating on the context of the wider need to revive funding of the real economy by improving the mixture and overall resilience of different funding sources. In this the new ELTIF can contribute to increasing non-bank finance available to businesses, to complement access to bank financing. The creation of the European Venture Capital Funds (EuVECA) and the European Social Entrepreneurship Funds (EuSEF) will, along with the ELTIFs, help to contribute to the financing of the European economy. But the EuVECA and EuSEF schemes target a very specific niche of the EU economy: start ups financed by venture capital and businesses specialising in achieving social impact. The proposal on ELTIFs follows a broader approach than EuVECA and EuSEF. It intends to target a broad range of long-term asset classes and it intends to create an investment fund that can also be sold to retail investors. This raises the need for three core features: (1) specific product rules covering eligible assets and their diversification; (2) a high degree of competence for those who are allowed to manage and market ELTIFs and (3) alignment between the ELTIFs investment horizon and the redemption expectations of its investors. |
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| Source Link | Link to Main Source http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM:2013:462:FIN |
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| Subject Categories | Business and Industry |
| Countries / Regions | Europe |
