FundRock Management Company SA
FundRock
FundRock is a leading independent Undertaking Collective Investment Transferable Securities (UCITS) Management Company and Alternative Investment Fund Manager (AIFM), offering solutions for Luxembourg, UK and Ireland based funds, with paid up capital in excess of the €10 million capital requirement ceiling.
ID: 141553038704-47
Lobbying Activity
Response to Long Term Investment Funds – Review of EU rules
14 Oct 2020
FundRock Group is a leading independent UCITS Management Company and Alternative Investment Fund Manager (AIFM), offering solutions for Luxembourg, UK, Ireland and French-based funds with paid-up capital in excess of the €10 million capital requirement. Our strong foundations and long track record of offering substance through robust fund governance dates back to 1935 (RBS Trustee & Depositary Services).
Our clients are established blue-chip companies and domestic market leaders. We have over 130 dedicated staff across five countries. We manage over 440 funds with assets under management of €83 billion (as of February 2020), distributed over 30 countries.
FundRock appreciates the opportunity to contribute to the inception impact assessment published by the European Commission on European Long-Term Investment Fund (ELTIF) Regulation Review.
For several years now, we have incentivised our clients in embracing the ELTIF framework but there is a lack of appetite, for four main reasons:
- Framework being unknown especially to non-EU stakeholders,
- Scope of eligible assets and investments being too narrow,
- Diversification limits being too strict,
- Borrowing limits being inadequate.
Before providing our input, we would like to emphasise the following point on retail access.
The ELTIF framework should be dedicated to two types of investors (see after “Eligible Investors”):
- Professional investors;
- Retail investors investing at least €100,000 (harmonised threshold with EuVECA/EuSEF).
ELTIF targeting Eligible investors should not be subject to the liquidity/redemption requirements. Those funds should be “pure” long-term funds without providing early redemption opportunities to investors. It is important to understand that any requirement improving fund liquidity is detrimental to the financing of SMEs, infrastructure and industry generally. Providing liquidity induces asset managers to invest in liquid assets (deposits, MMFs, cash). Such investment will not be used for financing the real economy. Nonetheless, other retail investors can always be exposed to ELTIF, via individual investment portfolios managed by MiFID-licensed companies or as unit-linked plans in insurance wrappers.
Regarding improvements outstanding to boost the use of ELTIF, the Commission should focus its review on:
1. Promoting the ELTIF framework towards EU and non-EU stakeholders
Currently, we advise our clients to use an ELTIF. However, most of the time investors are reluctant to use an unfamiliar framework. Road shows promoting the ELTIF brand should be organised by the EU and relevant stakeholders.
2. Broadening the scope of eligible assets and investments
Some aspects of asset eligibility should be clarified and modified. This is particularly the case with the meaning of “real assets”. It should be clarified that ELTIF can invest in real estate. For instance, the threshold of “10 million at the time the expenditure is incurred” limits the development of ELTIF and should be review.
3. Enlarging diversification limits
ELTIF regulation imposes diversification limits that are not suitable for capital investment and real estate.
4. Aligning the borrowing limit with AIFMD for ELTIFs targeted Eligible investors (article 16)
The current regulation limits borrowing at 30%. This limitation is too restrictive. The borrowing limit should be in line with the AIFMD, at least when the ELTIF is targeted Eligible investors. If co-legislators decide to maintain a limit, it should be at least 80%.
5. Loan origination
ELTIF regulation is an innovative framework by allowing funds to grant loans to eligible undertakings. Until now, ESMA has failed to develop, outside of the ELTIF Regulation, a harmonised framework for loan originating funds. The ELTIF framework should be used to develop such a harmonised framework for these funds. limit is not sufficient to allow the emergence of specialised asset managers.
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