BlackRock Alternative has published its latest white paper on the European Long-Term Investment Fund (ELTIF), in which it discusses the main advantages of the ELTIF model and the quiet explosion it has experienced since first introduced by the EU in 2015.
The firm writes that the ELTIF market is estimated to have reached EUR10 billion by the end of 2022 and over EUR 100 billion by 2027, particularly as European investors increasingly look to private markets to further diversify their portfolio and add resilience against a backdrop of rising inflation and higher macro volatility. Some 61 per cent of private bankers for high-net-worth clients are expected to increase their private market investments.
Political momentum behind the ELTIF will further drive significant growth for the vehicle, the firm says. Commenting on the EU’s formal adoption of ELTIF 2.0 on 15th February, West Lockhart, Head of Wealth for BlackRock Alternative Specialists, says: “We welcome the decision by the European Parliament to formally approve amendments to the ELTIF regulation. This marks a material step forward in the distribution and adoption of the ELTIF in Europe. This new structure will make it easier for private companies in the EU to access long-term financing and in turn contribute to the region’s economic growth. Importantly, it also offers a broader range of investors access to the benefits of private markets within a robust investor protection framework.”
In using ELTIFs in client portfolios, European wealth managers are encouraged to start looking at private market investments through the lens of a whole portfolio and not a single product based on its own merits – which entails fundamentally changing the dialogue had with clients, BlackRock says. “Clients and advisers will need to be educated on potential liquidity constraints as well as the role private markets play in terms of risk and return in portfolios. Distributing an ELTIF will require patience and careful deliberation across multiple steps that include the due diligence process, setting up the operational model as well as finalising advisor education and marketing materials.”
