We spoke to Nao managing director Robin Binder about how investors can invest in wind and solar parks with ELTIFs. Getty Images / Johannes Kroemer / NAO
Until recently, ELTIFs were associated with high investment hurdles for investors. For example, investors had to have portfolio assets of 100,000 euros and make a minimum investment of 10,000 euros.
We spoke to the managing director of the investment platform Nao and former manager of a family office Robin Binder about what ELTIFs are exactly, what opportunities they offer and how investors can now invest.
Most investors are familiar with stock funds, bond funds and exchange traded funds (ETFs). Many people feel differently with ELTIFs. Funds that are now getting a new regulatory coat of paint. While investments in ELTIFs were previously reserved for wealthy people, private investors can now also put their money into the funds.
What investors hope for from this: A high return and more diversification – i.e. a broader spread of the portfolio. But more return also means more risk. We talked to Robin Binder, Managing Director of the investment platform Nao, about what you should know and what you should generally pay attention to.
ELTIF – what is it?
The abbreviation ELTIF stands for “European Long-Term Investment Funds”. As the name suggests, the investor money flows into long-term projects in Europe. “ELTIFs have been around since 2015,” explains Binder. The funds were introduced by the European Union to promote the real economy. Specifically, the money from the funds flows into companies and projects that are important for society. These include roads, bridges, energy networks, wind farms and unlisted companies.
The financial hurdles of ELTIFs
The problem: The first regulatory framework for ELTIFs contained several hurdles. “It was doomed to fail,” says Binder. There was a minimum investment volume of 10,000 euros. Investors also had to prove portfolio assets of 100,000 euros. Both were a knockout criterion for many investors. “Since 2015, fewer than 100 ELTIFs have made it onto the market,” says Binder.
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ELTIFs are opening up to private investors
The new regulatory framework should now change that. “The essential thing is that both the minimum investment amount and the minimum portfolio assets no longer apply,” says Binder. Asset managers could now set up an ELTIF and let private investors invest from just one euro. Although no provider would most likely implement this, it would be possible purely from a regulatory perspective.
In addition, asset managers can now redeem shares before the end of the fund term. This means that investors do not have to commit to the entire term – as was previously the case – but can also sell their shares quarterly or annually, depending on the provider. “But there are still funds for long-term investors,” says Binder. On average, the money is usually tied up for around seven years.