The European ELTIF is precisely such a tool. With the entry into force of ELTIF 2.0 in January 2024, it became closer to retail investors and more convenient for asset managers. Over the past months the COREDO team has carried out several ELTIF launches and restructurings in Luxembourg and Ireland, adapted processes to the requirements of AIFMD, MiFID II, PRIIPs and SFDR, and established transparent AML/KYC procedures for investors from Europe, Asia and the CIS. In this article I summarize our experience and provide a compact yet thorough guide – from fund design to income distribution and liquidity management.
What is ELTIF 2.0 and what has changed for retail investors?
ELTIF – European Long-Term Investment Fund: a regulated EU alternative fund for investments in illiquid assets: infrastructure, the real economy, private equity and private debt. Version 2.0 (Regulation (EU) 2023/606, amendments to 2015/760) removed the main barriers for retail investors: the minimum amount of 10 000 EUR and the “10% test” for portfolios under 500 000 EUR were abolished. Now ELTIF accessibility for retail investors has become a reality, and the requirements for suitability and product governance have moved under the MiFID II framework.
COREDO’s practice confirms: these parameters allow building a realistic ELTIF portfolio structure with a balance of returns and control of illiquidity.
ELTIF vs UCITS: different objectives – different liquidity
Comparing ELTIF vs UCITS is important already at the product positioning stage. UCITS provide predominantly liquid markets, daily valuation and redemption, but rarely open access to infrastructure projects or private equity. ELTIF, by contrast, is built around long-term investments and may have a limited or closed redemption regime. In our experience, for wealth managers and private banks it is rather the strategic core of ‘alternative’ and real assets, while UCITS cover the liquid layer of the portfolio.
Marketing and passport in the EU: how to distribute ELTIF
The European ELTIF passport and passporting across the EU operate through AIFMD mechanisms. Manager: authorised AIFM: submits a notification to the national regulator, and the fund becomes available for cross-border ELTIF distribution in Europe. Consistency of the prospectus, UCITS-style disclosure for retail and compliance with MiFID II requirements on the target market, product governance and the suitability test are important. ESMA recommendations on ELTIF and technical guidance clarify the approach to liquidity, valuation and pre-contractual disclosures, and the European Commission rules on ELTIF set the overall framework of the 2.0 reform.
Access for retail investors: how to invest in ELTIF
Entering ELTIF for retail investors has become easier. The process typically includes onboarding: eKYC, eID and electronic signature, MiFID suitability/appropriateness questionnaires, provision of the PRIIPs KID, and signing subscription agreements. At COREDO we have built a digital route with AML and KYC requirements for investments in ELTIF, including enhanced Due Diligence for high-risk investors and checks of beneficial ownership registers. For clients from Asia and the CIS we add CRS and automatic exchange of information to avoid surprises in reporting.
Minimum amount, fees and expenses
ELTIF 2.0 removed the regulatory minimum entry threshold, so the minimum ELTIF investment amount is now determined by the prospectus and the distribution policy. We often see a range from 5 000 to 25 000 EUR for retail and from 100 000 EUR for professional tiers. ELTIF fees and expenses are transparent in the KID and prospectus: fixed management fee, possible performance fee, structural expenses, depositary, audit, custody and administration. Compensation structures for ELTIF managers include a hurdle rate, carried interest and performance fee mechanisms, and the waterfall distribution and payment priority are detailed in the LPA/prospectus, including clawback provisions.
Liquidity for retail investors: tools and limitations
The main question is ELTIF liquidity for retail investors. ELTIFs are illiquid by nature, but 2.0 allowed buyback mechanisms before maturity: redemption windows, matching of secondary orders and liquidity management tools. Liquidity management in ELTIF uses redemption gates, suspension and lock-up periods, side pockets for troubled assets, as well as swing pricing and NAV adjustment on inflows/outflows. The secondary market for ELTIF units is developing: exchange listings are still rare, but secondary-market platforms for units of alternative funds and broker ‘notice boards’ for deal matchmaking are emerging.
Taxes: structure matters more than the rate
Taxation of investments in ELTIF is not harmonised at the EU level and depends on the jurisdiction of the fund and the investor. Tax efficiency of an ELTIF for international investors is achieved through structuring via SPVs and holdings, using tax treaties and avoiding double taxation. At COREDO we model flows in advance, taking into account withholding on coupons/dividends, CFC rules in investors’ countries and ‘pass-through’ regimes in Luxembourg, Ireland or Malta. For HNWIs and family offices we often create bespoke tax memoranda and accompanying information-exchange agreements.
ELTIF portfolio structure: eligible assets, diversification, leverage
ELTIF leverage restrictions are tied to whether the marketing is to retail investors or to professionals only, and subscription lines and leverage in ELTIFs are allowed within the risk policy and AIFMD limits.
Investment opportunities: infrastructure and private markets
investment opportunities in ELTIF infrastructure are especially in demand amid the energy transition and digitalization. We structured an ELTIF with a portfolio of brownfield transport and energy projects in Central Europe, adding a share of greenfield with staged capital calls and construction insurance. Private equity investments through ELTIF cover buy‑out and growth stages, as well as private debt for SMEs, where returns are generated through coupon income and arrangement fees. Benchmarking: ELTIF versus private equity and infrastructure funds shows comparable returns with better transparency and European supervision.
Valuation, NAV and tools for illiquid assets
NAV valuation issues in illiquid ELTIFs are addressed through independent valuation of alternative assets and model validation. ESMA recommends stress tests and portfolio scenario analysis to show the impact of rates and credit spreads, as well as liquidity management under shocks. Side pockets and handling of illiquid assets help isolate problematic positions, and swing pricing adjusts investor entry/exit to protect existing unitholders. Our experience at COREDO has shown that a clear valuation methodology and oversight by an independent valuer simplify audits and reduce dispute risks.
Governance, legal aspects and AIFMD
The legal aspects of ELTIF registration are tied to AIFMD: manager — a licensed AIFM, depositary – with full oversight and depositary responsibility for safekeeping/recordkeeping. Custody and the role of the depositary in ELTIF require clear SLAs and monitoring of conflicts of interest, and regulatory supervision and ELTIF audit include regular disclosures, Annex IV reporting and an annual audit. We record regulatory changes and the compliance roadmap in a compliance calendar with checkpoints for ESMA technical guidance and internal policies on best‑practice compliance governance.
Jurisdictions and corporate structuring
Registering an ELTIF manager in Luxembourg or Ireland is the most common choice, but Malta remains a workable alternative. Onshore vs offshore funds: EU advantages: transparent supervision and a marketing passport; disadvantages: higher administration costs compared to offshore SPCs. Structuring via SPVs and holding companies allows addressing tax issues, subordination and local licensing; structural subordination and credit risk of SPVs are accounted for in the credit documentation and covenants. For investments outside the EU we add local SPVs with arrangements on security and a cash sweep in the waterfall.
Documents, fees, waterfall and capital calls
Preparing the prospectus and key documents includes: constitutive documents, offering memorandum, PRIIPs KID, SFDR disclosures, risk and liquidity policies, target market and product governance documents. Subscription agreements and legal documents carefully reflect the mechanics of investor contributions, capital calls, default procedures and penalty interest. The waterfall and income allocation in an ELTIF detail payment priorities: return of capital, hurdle rate, catch‑up and carried interest; we often add an escrow mechanism and definitions of “realised proceeds” to avoid ambiguity. ELTIF fees and expenses are disclosed according to PRIIPs KID disclosure requirements for retail investors.
Suitability, marketing and distribution channels
MiFID II and suitability assessment when selling ELTIFs are critical for stable distribution. Marketing notices and UCITS‑style disclosure are adapted to local regulator expectations, avoiding aggressive yield promises. Distribution channels: banks, private banks, wealth‑tech platforms and licensed distributors; integrating ELTIF into wealth management solutions helps build a “core‑satellite” model where ELTIF is a long‑term core of alternatives. COREDO helps align ELTIF passporting and marketing across the EU, including regional restrictions on sales outside the EU and working with investors from Asia and the CIS through local NPPR regimes or Reverse Solicitation.
ESG and Sustainable ELTIF: from SFDR to real impact
Sustainable ELTIF and SFDR require alignment: classification under Articles 8/9, PAI indicators, sustainability measurement methodologies and reporting. Greenwashing risks and the control of ESG claims we mitigate through project KPI matrices, external verification and harmonization of wording with the depositary and auditors. In infrastructure, ESG metrics are integrated into credit covenants and financing terms; this simplifies subsequent refinancing and increases the asset’s value at exit.
Tokenization, digital fund units and the secondary market
Tokenization of fund shares and blockchain solutions increase operational efficiency and the transparency of the register of fund units. ELTIF tokenization and digital fund units are implemented through the DLT laws of individual EU countries, and it’s important to distinguish regulation of digital assets and MiCA in the context of ELTIF: tokens representing a fund share are not equivalent to crypto-assets under MiCA. Secondary market platforms for alternative fund units already allow organizing matching and periodic auctions, which support liquidity and reduce the cost to the investor in the case of an early exit. The solution developed by COREDO combines eKYC/eID, electronic signature, AML monitoring and a secondary trading module with restriction controls.
ELTIF risks for private investors and how to manage them
Key risks: illiquidity, valuation and NAV recalculation, credit risk of borrowers/projects, leverage limits, operational risks and cybersecurity. ROI assessment and performance metrics for ELTIFs include IRR/TVPI/DPI and scenario analysis, stress testing and portfolio scenario analysis for rising rates and multiple compression. Exit strategies and ELTIF redemption windows require discipline: pre‑agreed periods, matching mechanisms and communication with retail investors and the KID.
COREDO case studies: from design to distribution:
Infrastructure ELTIF in Luxembourg. The COREDO team implemented a structure focused on brownfield assets of transport and energy infrastructure in Central Europe, integrated independent valuation and side pockets, and established quarterly redemption windows with limits. Passporting to Germany, Italy and Spain, channels: private banks and licensed platforms.
Private debt ELTIF in Ireland. Our experience at COREDO has shown that using subscription lines and soft leverage up to 40% of NAV accelerates capital deployment without loss of diversification. We established independent loan valuation, stress‑tested for rising rates and developed a waterfall with a hurdle rate and transparent carried interest.
Integration of ELTIF into wealth solutions. For a network of wealth managers and private banks we prepared target market and product governance documents, KID in several EU languages, as well as a MiFID suitability procedure. Clients — family offices — received a clear due diligence model when investing in ELTIF and regular SFDR reports.
Due diligence: checklist for managers and investors
COREDO’s practice confirms the value of systematic DD. We use a due diligence checklist for managers and investors:
- Manager and governance: AIFM license, Board independence, conflicts of interest policy.
- Strategy and pipeline: eligible assets list, geographic scope, co-investment, ELTIF regulatory restrictions.
- Risks and liquidity: liquidity management tools, redemption policy, stress tests, NAV valuation, independent valuation.
- Finance: ELTIF fees and expenses, waterfall structure, hurdle rate and carried interest, ROI scenarios.
- Operations: depositary and oversight, custody, cybersecurity and backups, operational risks.
- Legal and tax: prospectus, subscription agreements, Annex IV, double taxation and tax treaties.
- ESG: ESG standards and disclosures under SFDR, monitoring greenwashing claims.
Enforcement and disputes: what to expect
Legal disputes and precedents regarding ELTIF are still rare, but issues usually concern valuation, disclosures and liquidity. We include arbitration clauses, a procedure for an independent revaluation and clear definitions of liquidity events. For regions outside the EU we comply with sale restrictions and NPPR regimes, and also document reverse solicitation to minimize regulatory risks.
Macro factors, refinancing and flow management
We take the impact of macroeconomics and the interest rate on asset valuation into account in our models: duration of infrastructure cash flows, sensitivity of PE multiples and cost of debt. We plan capital inflow/outflow management and the refinancing market in advance: subscription windows, synchronization of capital calls with the pipeline and covenants on project refinancing. For investors this means a more stable strategy implementation and predictable communication about the payment schedule.
ELTIF for investors from Asia and the CIS
Investors from Asia and the CIS value European supervision and the ELTIF European passport. We take into account local rules and currency regimes, set up AML Enhanced Due Diligence, ensure CRS reporting and ownership transparency through beneficial owner registers. Where sale outside the EU is restricted, we use cooperation with local licensed partners or reverse solicitation mechanisms, without breaching the regulatory framework.
Best-practice compliance governance for managers
The solution developed at COREDO includes: a matrix of regulatory obligations under AIFMD/ELTIF, an Annex IV calendar, internal LMT policies, regular reports to investors and UCITS‑style disclosures. For risk assessment we apply stress tests, default SPV scenarios, structural subordination and credit risk analysis, as well as IT controls and cyber backup. Such a «framework» increases trust and simplifies work with auditors and the depositary.
- More accessibility: no regulatory minimum, clear KID and MiFID‑processes.
- More portfolio flexibility: broader eligible assets, reasonable diversification.
- More realistic liquidity: redemption windows and LMT with clear disclosure.
- Stronger focus on disclosures: PRIIPs KID, SFDR, ESMA guidance and product governance.
Conclusion: how to move forward
ELTIF 2.0 has become a mature tool for international investors and asset managers. For companies from the EU, Asia and the CIS it opens access to infrastructure, real assets and private markets with a European level of protection and transparency. It is important to soberly assess illiquidity, properly structure taxes and build operational discipline; then an ELTIF becomes not just a “long‑horizon fund” but a stable anchor for a portfolio.
The COREDO team has already helped launch and adapt such structures in Luxembourg, Ireland, Cyprus and Estonia, and also integrate them into banks’ channels and wealth platforms. If you need a roadmap for ELTIF — from choosing a jurisdiction and a depositary to product governance and cross‑border distribution — I’ll share practical templates, checklists and examples. Mature design, transparent disclosures and a demanding approach to risk are the three pillars that underpin a quality ELTIF, and that’s exactly how I am accustomed to building solutions together with COREDO.