A comprehensive survey of ELTIF providers and a market study conducted by Scope shows that ELTIF assets under management of around EUR 7.5bn are significantly higher than previously estimated.
Since 2015, ELTIFs (European Long Term Investment Funds) have enabled wealthy private investors to access illiquid asset classes such as infrastructure. After a restrained start, supply and demand for these funds have picked up significantly in the past year and a half. The market is much larger than previously thought: based on a representative survey of providers, Scope estimates the capital placed in ELTIFs at around EUR 7.5bn. The most recent estimate as at the end of April 2021 was EUR 2.4bn.
Private debt is the asset class most frequently represented, accounting for 36% of the volumes. The second biggest segment is infrastructure with 31%. Around 26% of the assets are invested in private equity ELTIFs. The remaining 7% are in ELTIFs that are involved in several asset classes.
Almost half of ELTIF capital (46%) is placed in products reserved for professional investors; 54% is invested in products that are eligible for both retail and professional clients. The most active asset managers, which also offer their products to private investors, include Amundi, Azimut, BlackRock, Commerz Real, Muzinich and Partners Group.
Italy and France in front; Germany catching up
The largest regional markets in Europe are Italy and France. The Italian ELTIF market is dominated by private investors, who benefit from tax incentives under certain conditions. The French ELTIF market is mainly a market for professional investors and has the longest history in Europe.
The ELTIF market in Germany is lagging. One of the reasons is that after the bad experiences with closed-end investments during the financial crisis, there was some scepticism towards closed-end products, especially in Germany. In addition, complex and largely manual fund processing has hindered sales, exacerbated by fragmentation across the banking sector and the fund platform market. In Germany, ELTIFs have therefore been placed mainly in the private wealth units of major banks, which carry out processing in-house.
After initial difficulties, however, there have been positive recent examples of ELTIFs catching on outside the major banks in Germany. Learning processes have developed both in the distribution of private banking units and in the settlement platforms.
EU amendment as a potential growth driver
A growth driver for the ELTIF market could be the legal amendments currently under discussion in the EU, intended to optimise the framework for the offer and distribution of ELTIFs by reducing restrictions. In addition, the establishment of secondary market trading would be beneficial, as affluent private customers in particular sometimes see the illiquidity of the vast majority of ELTIF products as a hurdle. Experience from Italy shows that tax incentives can be an additional major growth driver for the ELTIF market.
Beyond investors and fund providers, the EU is also likely to be interested in more widespread use of ELTIFs. The product regime could prove to be a powerful tool in the implementation of the European Green Deal because it promotes investments in real assets and infrastructure. Accordingly, there is much to suggest that the momentum recently observed in the ELITF market will continue.
Scope’s evaluation of this market is based on an extensive survey of providers conducted between November 2021 and March 2022. The study is based on data from 43 of the 53 registered and marketed ELTIFs. These are offered by 31 different asset managers. The volume of the 43 ELTIFs for which detailed data is available amounted to EUR 7bn at the end of 2021. Scope estimates the volume of the remaining 10 ELTIFs at between EUR 200m and EUR 700m.