Money managers operating in the European Union anticipate an increase in alternative investment opportunities as regulators relax rules for European long-term investment funds.

Under the latest proposal to reform the Capital Markets Union — an ongoing initiative aimed at creating a single pan-European financial market — the European Commission is revising how money managers can set up and market European long-term investment funds, known as ELTIFs. These collective investment strategies — currently only offered by certain alternatives money managers — channel assets into projects across Europe that need long-term capital.

Total assets invested in ELTIFs increased to €2.4 billion ($2.7 billion) in 2021 from €1.5 billion in 2020, according to data by the European Securities and Markets Authority. And while ELTIFs have been particularly popular with smaller pension funds, endowments and foundations that want to add small allocations to private markets but struggle to access the largest private equity funds, the strategies have not yet fulfilled their potential due to too stringent rules, sources said.

“Up to now ELTIFs were a missed opportunity. It was a good idea (with an unsatisfactory) framework illustrated by the limited number of EU ELTIFs registered,” said Stephane Janin, head of global regulatory developments and public affairs at AXA Investment Managers in Paris.

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