The evolution and future of the ELTIF structure in the European Union

The ELTIF market has experienced remarkable growth, particularly in the last few years. In 2024 alone, a record 55 new ELTIFs were launched – more than double the previous high in 2021. According to a report published by SCOPE Fund Analysis in March 2025, the total ELTIF market volume reached approximately 20 billion by the end of 2024, representing a massive increase from the previous year. This surge was driven by several factors:

• Regulatory clarity: the finalisation of the ELTIF 2.0 regulation and the adoption of the RTS in October 2024 provided much-needed certainty for asset managers and distributors.

• Product innovation: the introduction of semi-liquid (evergreen) ELTIFs, lower minimum investment amounts and more flexible redemption options broadened the appeal to private investors.

• Pan-European distribution: the European passporting mechanism enabled cross-border marketing, with Luxembourg emerging as the dominant domicile due to its regulatory expertise and acceptance among distributors.

Domicile and distribution patterns

Luxembourg, through its Commission de Surveillance du Secteur Financier (CSSF), has established itself as the leading ELTIF hub – authorising 98 out of 150 ELTIFs by the end of 2024. France follows with 31 products, while other jurisdictions such as Italy, Ireland, Germany and Liechtenstein are gradually increasing their presence. The CSSF’s leadership is reflected not only in the number of products but also in terms of volume, with Luxembourg-domiciled ELTIFs accounting for roughly two thirds of the total ELTIF market volume.

Investor base and regional dynamics

French investors continue to dominate the ELTIF landscape, followed by Italy and Germany. The French market is characterised by a strong institutional presence and the integration of ELTIFs into unit-linked life insurance policies, which offer tax advantages and facilitate retail participation. In Italy, tax incentives for PIR-compliant ELTIFs have spurred significant retail demand, while Germany’s growth is increasingly driven by infrastructure-focused products and the gradual adoption of ELTIFs by private banks and digital platforms.

Asset class allocation

ELTIFs provide exposure to four main private market segments: private equity, private debt, infrastructure and real estate. As of 2024, private debt leads the field, followed by infrastructure and private equity. Real estate and multi-asset strategies account for smaller, but growing portions.

The introduction of ELTIF 2.0 marks a watershed moment for the regime. The revised regulation, effective from January 2024, and the subsequent RTS have addressed many of the shortcomings of the original framework:

• Lower investment thresholds: the minimum investment amount of EUR 10,000 and the 10% cap on total assets for smaller investors have been abolished, making ELTIFs more accessible.

• Flexible structures: the new rules allow for semi-liquid (evergreen) ELTIFs, enabling periodic redemptions to be made under defined conditions and aligning product features with investor preferences for liquidity.

• Broader eligible assets: the required allocation to eligible assets has been reduced from 70% to 55% and fund-of-funds structures are now permitted, increasing diversification options.

• Streamlined distribution: the separate suitability test for retail investors has been removed, simplifying the sales process.

Liquidity management and redemption mechanisms

A key innovation under ELTIF 2.0 is the detailed framework for liquidity management in semi-liquid products. The RTS specify minimum liquidity ratios based on redemption frequency and notice periods, balancing investor access with the illiquid nature of underlying assets. While this flexibility is widely welcomed, it also introduces new risks, particularly the potential for maturity transformation mismatches if redemption requests outpace available liquidity.

Market reception and ongoing challenges

The market has responded positively to ELTIF 2.0, with a majority of new launches adopting semi-liquid structures. Asset managers appreciate the increased flexibility, while distributors see greater potential for integrating ELTIFs into discretionary portfolio management and digital platforms. However, challenges remain:

• Operational complexity: settlement and onboarding processes are still evolving, with platforms like Allfunds and Clearstream Vestima working to standardise and automate ELTIF processing.

• Education and training: both investors and advisors require comprehensive education on the unique features, risks and opportunities of ELTIFs, particularly given the illiquidity and long-term nature of private market investments.

• Reputational risk: the influx of new providers and products raises concerns about product quality and liquidity management. A poorly managed ELTIF could damage the reputation of the entire segment.

One of the most significant achievements of the ELTIF regime is the broadening of the investor base. Of the 133 actively marketed ELTIFs at the end of 2024, around two thirds are accessible to both institutional/professional and private clients. Private equity ELTIFs are particularly popular among retail investors. This reflects the appeal of higher return expectations and the role of private equity as an entry point into private markets.

Regional differences are pronounced. In Italy and Germany, retail investors are the primary drivers of ELTIF growth, supported by tax incentives and strong distribution networks. In France, institutional investors remain dominant, but the integration of ELTIFs into insurance wrappers is expanding retail participation.

ELTIFs are generally more cost-effective than traditional private market vehicles such as funds of funds. According to a report by SCOPE Fund Analysis published in March 2025, the average management fee for retail-accessible ELTIFs is 1.92% per annum, with private equity strategies commanding the highest fees (average 2.17%). Performance fees – typically 10–20% above a hurdle rate – are common, and entry fees may apply, especially for products targeting the mass affluent segment. 

Return expectations vary by asset class. Surveyed asset managers anticipate net IRRs of 10–15% for private equity, 7–9% for private debt and 5–9% for infrastructure. Multi-asset ELTIFs are also expected to deliver attractive returns, with the added benefit of diversification.

Sustainability is increasingly central to the ELTIF value proposition. Of the 133 active ELTIFs, 62 have an explicit ESG focus, with 49 classified under Article 8 and 13 under Article 9 of the EU Sustainable Finance Disclosure Regulation (SFDR). This trend is accelerating, with most new launches in 2024 and 2025 adopting at least Article 8 status.

The success of the ELTIF segment depends not only on product innovation but also on effective distribution. Banks, private banks and digital platforms are increasingly integrating ELTIFs into their offerings, particularly as settlement and operational hurdles are addressed. The shift towards semi-liquid structures is making ELTIFs more attractive for inclusion in discretionary portfolios and model portfolios.

However, the ELTIF remains a ‘push’ product – investors rarely request it proactively. Education and advisor training are critical to building trust and understanding, especially in markets like Germany where scepticism towards closed-end products persists.

Despite the positive momentum, the ELTIF market faces several risks:

• Political and economic uncertainty: geopolitical tensions, economic recession fears and shifting regulatory landscapes can impact investor confidence and capital flows.

• Maturity transformation risk: the mismatch between illiquid assets and periodic redemption options in semi-liquid ELTIFs requires robust liquidity management and investor education.

• Reputational risk: the entry of inexperienced asset managers and the potential for underperformance or liquidity crises could undermine the credibility of the ELTIF regime. 

• Operational barriers: settlement, onboarding and cross-border distribution processes are still being optimised, and further standardisation is needed.

The outlook for ELTIFs is highly optimistic. Market participants expect the segment to triple in size by 2027. Many new ELTIFs are anticipated in the next 12 months, with continued innovation in product design, asset class focus and distribution channels.

Key drivers of future growth include:

• Regulatory certainty: the resolution of regulatory uncertainties and the harmonisation of private market access across the EU.

• Tax incentives: national initiatives, such as Italy’s PIR regime and France’s integration of ELTIFs into insurance products, are powerful catalysts for retail participation. 

• Sustainability: the alignment of ELTIFs with ESG objectives and the EU’s green transition agenda will attract both institutional and retail capital.

• Digitalisation: the integration of ELTIFs into digital platforms and the development of secondary markets will enhance accessibility and liquidity.

The evolution of the ELTIF structure represents a significant step towards a more integrated, resilient and dynamic European capital market. By democratising access to private markets, fostering long-term investment and supporting the EU’s strategic priorities, ELTIFs are poised to play a central role in the continent’s economic transformation.

However, realising this potential requires continued collaboration between regulators, asset managers, distributors and policymakers. Operational challenges must be addressed, investor education prioritised and product quality maintained in order to build lasting trust and confidence.

As the ELTIF market matures, it will not only mobilise capital for Europe’s most pressing needs but also offer investors new avenues for diversification and return. The journey is far from over, but the foundations are now firmly in place for ELTIFs to become a cornerstone of the European investment landscape.