Investor organisations say EU proposals on European long-term investment funds (ELTIFs) should boost liquidity for small and mid-cap stocks and lower the cost of capital.
The proposals, which a trio of trade bodies including the European Fund and Asset Management Association welcome, include a flexible regime for ELTIFs, allowing for separate professional and retail ELTIFs and different levels of investor protection.
Developed by the European Commission, it is hoped ELTIFs will encourage “patient capital” and lead to investments in public infrastructure such as schools, roads and energy plants.
However, the three groups say in a joint statement that a proposal for the right of retail investors to redeem their shares prior to the end of the ELTIF's lifetime, “does not create an efficient framework”. The groups say the policy on redemptions should be left to the discretion of the ELTIF manager.
“As the operators of the European exchanges that have admitted to trading about 9,400 SMEs [small and medium enterprises], our members are delighted that the ELTIF proposal will help boost the smaller companies’ liquidity by enabling more investors to invest in them,” says Judith Hardt, director general, Federation of European Securities Exchanges, one of the three trade groups.
“This will improve the conditions for future mid-cap IPOs [initial public offerings] and lower the cost of capital, while allowing European investors to benefit from long-term investments conducted by Europe’s most dynamic and rapidly growing companies.”
The European Private Equity and Venture Capital Association is also part of the three trade bodies that welcome the initiative.
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