Improved retail investor access to European long-term funds
‘The revised framework has the potential to transform ELTIFs into a product of choice’ says EFAMA
Investors will have better access to company and trading data after the EC adopted a package of measures on Thursday aimed at ensuring people get the best deals for their savings and investments.
The move will also improve the ability of companies to raise capital across the bloc.
The Commission outlined the four key legislative proposals that have been adopted.
European Single Access Point (ESAP)
The ESAP will offer a single access point for public financial and sustainability-related information about EU companies and investment products.
This will give companies more visibility towards investors, opening up more sources of financing.
This is particularly important for small companies in small capital markets, as they will more easily be on the radar screen of EU, but also international investors.
The ESAP will also contain sustainability-related information published by companies, which will support the objectives of the European Green Deal. As a common data space, the ESAP is a cornerstone of the EU’s Digital Strategy and the Digital Finance Strategy.
Review of the European Long-Term Investment Funds (Eltifs)
The review will increase the attractiveness of Eltifs for investors and their role as a complementary source of financing for EU companies.
It will also make it easier for retail investors to invest in Eltifs, in particular by removing the minimum €10,000 (£8,411, $11,213) investment threshold, while ensuring strong investor protection.
Since Eltifs are designed to channel long-term investments, the EC belieces they are also well placed to help finance the green and digital transitions.
The European Fund and Asset Management Association (Efama) said that “the revised framework has the potential to transform Eltifs into a product of choice for European investors and to become a cornerstone of the Capital Markets Union”.
While it welcomed many elements, including the removal of minimum investment amounts for retail investors and the broader scope of the eligible asset universe, Efama said some parts of the proposal “will require scrutiny” and “further clarity”.
Review of the Alternative Investment Fund Managers Directive (AIFMD)
The EC changes will also enhance the efficiency and integration of the Alternative Investment Funds market.
The proposal harmonises the rules related to funds that give loans to companies. This will facilitate lending to the real economy, while better protecting investors and ensuring financial stability.
The review also clarifies the rules on delegation, which allow fund managers to source expertise from third countries. The review will ensure that there is adequate information and coordination among EU supervisors, better protecting investors and financial stability.
Review of the Markets in Financial Instruments Regulation (MiFIR)
The adjustments to EU trading rules will ensure more transparency on capital markets.
They will introduce a ‘European consolidated tape’, which will give investors access to near real-time trading data for stocks, bonds and derivatives across all trading venues in the EU.
So far, this access has been limited to a handful of professional investors.
The review will also enhance the level playing field between stock exchanges and investment banks. In addition, it will promote the international competitiveness of EU trading venues by removing the open access rule.
Valdis Dombrovskis, executive vice-president for An Economy that Works for People, said: “Europe needs vibrant and integrated capital markets to boost the real economy and bounce back after the covid-19 crisis.
“[These] proposals take us a significant step closer towards creating the Capital Markets Union. This is important for the growth of the EU economy. We achieve this by improving access to company and trading data, and gearing investments towards our sustainability and digital priorities.
“[This] package has a strong focus on helping small companies in small capital markets, making it easier for SMEs to find and access different sources of funding. It will also enhance the international competitiveness of the EU as a place to trade.”
Mairead McGuinness, commissioner responsible for financial services, financial stability and Capital Markets Union, added: “Capital markets play an essential role, alongside banks, in financing our economy but more progress is needed to move towards the completion of the Capital Markets Union.
“We are today taking action at various levels: making our capital markets more transparent, facilitating access to financial and sustainability-related data, and making investment products such as Eltifs and other alternative investment funds more attractive to investors and fund managers.
“This will better serve the needs of companies seeking finance to grow their business, which is crucial for the recovery and in meeting our green and digital objectives.
“But we are not stopping here; we are also announcing today more ambitious CMU initiatives to come in 2022 on access for companies to public markets, open finance, financial education and insolvency.”