European Long Term Investment Funds

The FCA consultation paper CP15/27 was not solely confined to UCITS V (see above article) as the “… other changes to the Handbook affecting investment funds” includes a section (Part II) on European Long Term Investment Funds (ELTIF).  Although these funds will be categorised as EU AIFs it will be possible to market them to retail investors provided that certain requirements are met.  As a reminder, the concept of ELTIFs stems from an EU Regulation and are funds designed to provide long term finance for areas such as infrastructure – see Regulatory Roundup 65 for further details.

Although the ELTIF Regulation is directly applicable under EU law, and so does not require implementation by the FCA, certain areas of the UK regulatory framework have been identified that need to be amended.

FUND 4 – which up to now has been a blank page aside from its title of ‘common requirements for all retail funds’ – will be renamed (‘European AIF regimes’) and overhauled to incorporate most of the ELTIF-related changes in the Handbook.

From a marketing perspective, submission of the usual AIF Notification form is required (which can be accessed via FUND 3 Annex 1 and SUP 13 Annex 8) but will also require submission of an additional new ELTIF-related form which can be accessed via FUND 4 Annex 1R.

FUND 4.2 confirms that to manage an ELTIF an AIFM needs to be a full-scope AIFM and that it will require the permission of ‘managing an authorised AIF’ – note that the ELTIF Regulation requires the fund to be authorised in accordance with said Regulation. In addition the FCA is of view that the requirements for an AIFM (or a depositary) of an ELTIF are closer to those for current types of authorised AIF e.g. a NURS than they are for  other types of AIF.  However, despite the need to have the activity of ‘managing an authorised AIF’ on the Part 4A of an ELTIF AIFM, being a closed-ended fund an ELTIF will not actually be an ‘authorised fund’ in terms of the Handbook (except for the purposes of FEES 6 and COMP). With regard to the latter the FCA has decided that ELTIFs should fall within the FSCS scheme (and FOS) – currently managers (and depositaries) of closed-ended corporate AIFs do not have that benefit.

The FCA invites comments by Monday 5 October 2015. The ELTIF Regulation applies from 9 December 2015.