The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, has responded to the European Commission request on amendments to the European long-term investment fund (ELTIF) Technical Standards (RTS). In the letter ESMA suggests that there should be a limited number of changes to find the right balance between protecting retail investors and contributing to the capital market union objectives.

On the RTS on redemption policy, and specifically on the calibration of the requirements relating to redemptions and liquidity management tools, ESMA acknowledges that there should be an appropriate balance between protection of retail investors and financial stability related objectives and the fact that ELTIFs should make an important contribution to the capital market union objectives. However, in view of the Commission’s comments, ESMA proposes striking that balance slightly differently from the European Commission.

Background: On December 2023, ESMA published its final report on the draft technical standards under the revised ELTIF Regulation and submitted it to the European Commission for adoption. In March 2024, the Commission informed ESMA that it intends to adopt the proposed RTS with amendments, and invited ESMA to submit new draft RTS reflecting the amendments provided. The Commission encouraged ESMA to consider the individual characteristics of different ELTIFs to build a more proportionate approach about the calibration of the requirements relating to redemptions and liquidity management tools.

The revised ELTIF Regulation states that ESMA shall develop draft regulatory technical standards (RTS) to determine the following:

the circumstances in which the life of a European long-term investment fund (“ELTIF”) is considered compatible with the life-cycles of each of the individual assets, as well as different features of the redemption policy of the ELTIF;

the costs disclosure.