ELTIF 2.0: what changed in the EU rules and why it matters

ELTIF 2.0 is the common name for Regulation (EU) 2023/606, which amended the original ELTIF Regulation (EU) 2015/760 and applies from 10 January 2024. It made the European long-term investment fund more flexible for managers and more accessible for retail investors: it removed a minimum size for individual real assets, raised the borrowing limits, dropped the minimum retail investment, tied retail sales to a suitability assessment under MiFID II and set out when redemptions during the fund's life are possible. What it did not change is the basic character of the product. An ELTIF is still a long-term, largely illiquid investment, and the reform does not reduce its risk.

When did ELTIF 2.0 start to apply?

Regulation (EU) 2023/606 applies from 10 January 2024. It does not replace the original regulation. It amends Regulation (EU) 2015/760, so the legal text you read today is the 2015 regulation as amended. When fund documents refer to "the ELTIF Regulation", they normally mean this amended text.

The reform was a response to the limited take-up of ELTIFs under the original rules. The aim was to channel more long-term capital into assets such as infrastructure, real estate and unlisted companies, while keeping protections for investors who are not professionals. In practice this means more freedom on the portfolio side and more structured obligations on the selling side. For a basic introduction to the product itself, see what an ELTIF is.

What are the new ELTIF rules on the portfolio?

The amended Article 13 sets the core portfolio rules:

• An ELTIF must invest at least 55 % of its capital in eligible investment assets, such as unlisted companies, infrastructure or real assets.
• No more than 20 % of its capital may be invested in instruments issued by, or loans granted to, a single qualifying portfolio undertaking.
• No more than 20 % of its capital may be invested in a single real asset.

ELTIF 2.0 also removed the requirement that individual real assets must have a value of at least EUR 10 000 000. This matters for real estate and infrastructure funds, because it opens the door to smaller properties and projects. A smaller asset is not automatically a better or worse investment than a larger one. The change simply widens the range of what a manager can buy.

Under Article 17(1), the composition and diversification requirements stop applying once the fund starts selling assets to repay investors after the end of its life. During the wind-down phase, the portfolio can therefore look quite different from the one described during the investment period.

How did borrowing limits change?

Under the amended Article 16(1)(a), an ELTIF may borrow cash up to 50 % of its net asset value (NAV) if it can be marketed to retail investors, and up to 100 % of NAV if it is marketed only to professional investors. Before the reform, the limit was 30 % of the fund's capital.

Borrowing can increase returns when assets perform well, but it also magnifies losses when values fall, and it brings refinancing and interest rate risk. A higher permitted limit does not mean a fund will use it, but it does mean you should check the actual borrowing policy in the fund documents. See leverage for a short definition and the risks guide for how it fits with other risks.

What changed for retail investors in ELTIF?

Two entry barriers were removed. The initial minimum investment of EUR 10 000 for retail investors no longer applies, and neither does the rule that retail investors with a financial instrument portfolio of up to EUR 500 000 could invest no more than 10 % of that portfolio in ELTIFs.

In their place, Article 30(1) puts the emphasis on suitability. An ELTIF may be offered to a retail investor only if a suitability assessment has been carried out under Article 25(2) of Directive 2014/65/EU (MiFID II) and the investor has received a suitability statement. If the assessment concludes that the ELTIF is not suitable, the sale is not investment advice and the investor still wants to go ahead, the investor must give express consent confirming that they understand the risks.

Article 30(2) adds a written alert. The distributor, or the manager when it sells directly, must warn retail investors in writing that if the fund's life exceeds 10 years, the product may not be suitable for investors who cannot sustain such a long-term and illiquid commitment, and that any matching of units does not ensure or create a right to exit or redemption. The guide for retail investors covers these steps in more detail.

Can I now redeem an ELTIF before the end of its life?

The default rule remains: investors cannot request redemption before the end of the fund's life (Article 18(1)). The fund rules must state the end date clearly and may allow the life to be extended temporarily.

What ELTIF 2.0 added is a structured route for redemptions during the life. They are possible only if the fund rules allow them and all of these conditions are met:

1. No redemption is granted before the end of the minimum holding period.
2. The manager can demonstrate to the competent authority an appropriate redemption policy and liquidity management tools compatible with the long-term strategy.
3. The policy clearly sets out the procedures and conditions.
4. Redemptions are limited to a percentage of the fund's liquid assets.
5. If requests exceed that percentage, they are reduced pro rata, with equal treatment of investors.

Investors always have the option of a cash payout. Payout in kind is possible only if the rules offer it, the investor asks in writing and there are no restrictions on transferring the assets. The liquidity guide explains these rules step by step.

What is matching of units?

Under Article 19, the fund rules must not prevent investors from freely transferring their units to third parties other than the manager, in line with applicable law and the prospectus. The rules may also allow matching, in which requests from investors who want to leave are paired with requests from those who want to come in. Matching can help, but it does not ensure an exit, and the written alert under Article 30(2) must say so.

Before and after: a summary of the main changes

The table lists only changes where both the earlier and the current position are confirmed in the verified legal text.

Other rules described above, such as the 55 % and 20 % portfolio limits, the suitability statement, the redemption conditions during the life and matching, are part of the current framework. Their earlier wording is not summarised here, so if you need a precise comparison, read the original and amended texts on EUR-Lex.

What did not change?

Three things remain the same, and they matter more for most investors than any individual rule:

• Long-term nature. The life of an ELTIF must be compatible with its long-term character and with the life cycles of its assets (Article 18(3)). Money invested may be committed for many years.
• Illiquidity. The assets are hard to sell quickly. Redemptions during the life, where allowed, are capped and may be reduced pro rata. A transfer needs a buyer.
• Risk. The value of the investment can fall, and you can lose money. Wider eligible assets and higher borrowing limits increase flexibility for the manager, not certainty for the investor.

Managers remain subject to the organisational rules of the AIFMD, including the management of conflicts of interest, and ESMA keeps a central public register of ELTIFs.

A practical example

A hypothetical investor reads about ELTIF 2.0 and concludes that, because the minimum investment has gone and redemptions are now possible, the product has become similar to an ordinary mutual fund. On reading the documents, the investor finds that the fund has a long life, a minimum holding period, a redemption cap tied to liquid assets and a matching facility without any promise of an exit. The suitability assessment then asks about the investor's horizon and need for access to money. The conclusion is that the lower entry barrier changed who can buy, not how the product behaves. Use the pre-investment checklist to work through these points.

Risks and limitations of this overview

This article summarises the verified legal changes. It does not cover the regulatory technical standards on redemption policy and liquidity tools in detail, national marketing rules or tax treatment, which differ by country. Fund-specific terms are set out in each fund's rules, prospectus and KID, and those documents prevail for any particular product.

Frequently asked questions

General information. Not investment advice or a suitability assessment.

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