ELTIFs: A Path to Private Markets
ELTIFs: A Path to Private Markets
ELTIFs: A Path to Private Markets
Private assets have historically been challenging for individual investors to gain exposure to. But that’s no longer the case. In recent years, the launch of ELTIFs (European Long-Term Investment Funds) has been helping more investors in Europe access private markets. We address some frequently asked questions regarding ELTIFs, including how they work and the main benefits they provide.
What is an ELTIF?
An ELTIF is a type of investment fund designed to provide long-term financing to projects and private companies. Unlike traditional mutual funds that invest in publicly traded stocks and bonds, ELTIFs invest in assets that cannot easily be bought or sold daily. The main kinds of assets they can invest in include private equity (private companies) and private credit (non-bank loans provided to companies).
Why were they developed?
ELTIFs aim to do two things: give more investors access to private markets and direct long-term money towards projects that could potentially benefit both investors and the economy. The EU created ELTIFs to help fund long-term projects across Europe that struggled to get money from banks after the 2008 financial crisis. In 2023, the rules for ELTIFs were updated (ELTIF 2.0) to make them easier to access.1 This means lower minimum investments and potential for enhanced liquidity. However, it's crucial to acknowledge the delicate balance required in managing inherently illiquid assets within an open-ended (evergreen) fund structure—which means it is still relatively more difficult for investors to redeem out of their ELTIF investments compared to more traditional investments. For example, redemptions could be offered infrequently and subject to overall redemption caps.
How do they work?
ELTIFs combine money from many investors, which professional managers then invest in a diverse portfolio of private market assets. These could be private companies and projects or privately negotiated loans to companies. Returns come from the income these investments generate and from the growth in value of the assets themselves. These could be private companies or projects. There are two main types: closed-end funds, where your money is committed for a fixed period (usually 7-10 years), and open-ended (evergreen) funds, which allow you to invest and withdraw periodically (subject to the limitations described above). ELTIFs are permitted to hold liquid investments, such as holding cash reserves, to support the portfolio's redemption needs.
What are some risk considerations?
Investing in an ELTIF involves a distinct set of considerations that differ from traditional public market investments. While these funds provide access to private equity and credit, investors should view them as long-term commitments with limited exit opportunities (as described above). We believe that investors should expect these investments to typically have a holding period of 8 or more years. Furthermore, private assets often lack transparent, daily pricing, making them difficult to value. As is always the case in investing in collective investments, there is a risk of capital loss and that you may lose some or all of your capital.
Benefit: Private equity and private credit have historically delivered superior long-term returns compared to traditional equity and credit investments. For instance, private equity has outperformed public stocks over longer periods by focusing on long-term growth and value creation.2 Private credit has also typically offered more attractive yields than high yield and syndicated loan markets, and maintained loss ratios that are lower than those of high yield bonds.3
Risk: Past performance does not predict future returns. Investments in private markets can be unpredictable and risky.
Benefit: Many fast-growing companies now stay private for longer, creating more value while privately owned and inaccessible in traditional public markets. Investing in an ELTIF can provide access to that earlier stage of development. Broader growth of private markets is also creating opportunities to provide tailored financing structures and solutions across a range of sectors.
Risk: Private markets investments are usually illiquid, which means you may be limited in your ability to exit your investment. For example, you may not be able to redeem your investments other than at specified dates (typically quarterly) and subject to restrictions such as caps on the fund’s overall redemptions (typically 5% of the fund’s NAV, and subject to the fund manager’s discretion). The ELTIF regulations may further limit the level of liquidity on each redemption date. There may be no secondary market for your investment.
Benefit: Beyond potentially higher returns and more opportunities, private assets also help diversify investments. They often don't move in sync with public markets4, which can make overall portfolios less volatile and offer some protection when public markets struggle. Therefore, we believe investing in private markets can be a way to diversify and potentially improve risk-adjusted returns.
Risk: Diversification does not protect an investor from losses and does not ensure a profit
Benefit: ELTIFs are regulated by the EU with safeguards designed to enhance transparency and protect investor interests. However, even with these rules, the performance of different ELTIFs can vary significantly. This means that while regulations ensure structural integrity and transparency, they don't guarantee profits. Therefore, it's crucial to do your research and choose a fund manager carefully.
Risk: Your capital is at risk and you may lose some or all of your investment. Investing in an ELTIF involves investing in the units or shares of the fund rather than in the underlying assets held by the ELTIF.
1 European Commission. As of October 2024.
2 Cambridge Associates. March 2025. Private equity PME vs. the MSCI World Index. PME is a public market equivalent methodology that measures the performance comparison between a private investment and a public alternative.
3 Morningstar, LCD. As of September 2025. Public market yields reflect the asset-weighted median 12-month yields of mutual funds and ETFs in their respective Morningstar categories: High Yield Bond, Emerging Markets Bond, Corporate Bond, and Real Estate+ Global Real Estate. Private Credit yield reflects the spread over SOFR as of September 2025 + SOFR level. Based on historical distribution patterns for comparison purposes, and are not a forecast of future economic behavior.
4 Correlation with global equity over ten year period. Cambridge Associates (private markets),NAREIT (public real estate), FTSE Global Infra index (public infrastructure), Barclays (high yield). Correlation with global equity over ten year period. As of December 2024. Past performance does not predict future returns and does not guarantee future results, which may vary.
