ELTIF market volume significantly larger than thought

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.