A new era for Europe’s private markets with ELTIF 2.0

Jan 31, 2025

By Fabio Osta, Head of the Alternatives Specialists Team in EMEA Wealth

Europe’s economy is undergoing a profound transformation. Global trends like the low-carbon transition, AI and digital disruption as well as the reshaping of supply chains are driving sweeping changes across societies and sectors. These shifts present both challenges and opportunities. Private markets – encompassing trading of securities, assets and investment offerings that are not publicly listed on stock exchanges (known as the public market) such as real estate, private debt or infrastructure projects – are increasingly stepping up to meet the growing demand for investments in strategic areas like energy and technology. 

Governments alone cannot finance these needs, especially as they face mounting pressure to rein in public debt. In this context, private markets can help bridge the funding gap, directing resources into vital economic projects to support innovation and growth. Industry estimates project private markets will grow from $13 trillion today to more than $30 trillion by 2030.1 The European Long-Term Investment Fund (ELTIF), particularly its updated version commonly referenced as ELTIF 2.0, is at the forefront of this evolution.

Traditionally, private markets used to be the domain of institutional investors or ultra-wealthy individuals, largely due to their complexity and high investment thresholds. ELTIF 2.0 seeks to change that by simplifying investment rules and introducing more flexible structures that make private markets more accessible to retail investors than ever before. 

Unlike traditional private funds that lock investors into fixed-term commitments and set subscription windows, the updated framework enables ongoing investments and periodic withdrawals with notice periods to manage liquidity demands. Standout features of ELTIF 2.0 include "evergreen" investment strategies, which allow investors with different time horizons to co-invest, without dealing with the operational complexity of closed-end funds2 prevailing until now. This approach strikes a balance between flexibility and long-term exposure, capturing the unique benefits of private markets such as their potential for higher returns and diversification while allowing for windows of liquidity for investors.

Additionally, ELTIF 2.0 expands the range of investments across sectors, regions and projects, offering opportunities across the world in the most dynamically growing areas like renewable energy and digital infrastructure3. For instance, global investment in EV charging infrastructure surged by nearly 50% in 2023.4 Through ELTIF 2.0, European investors could more easily tap into such growth stories.

The appeal of private markets also lies in their tangible nature, as they enable impactful projects that are easy to understand – whether it’s building renewable energy facilities, modernizing transport networks or expanding data centres for digital transformation, making them more relatable for wealth and retail investors. One major growth area is AI, where private assets offer investors the opportunity to invest across the entire AI value chain – including data centres and data infrastructure. Capital expenditure for AI data centres is seen exceeding $1.5 trillion by 20305. Such projects don’t just promise returns. They actively shape the world we live in.

However, private markets come with specific considerations such as illiquidity — the inability to sell investments quickly. It’s crucial for investors to understand how private markets fit within a diversified portfolio and align with their financial goals and timelines. Asset managers and distributors need to provide clear guidance and education on the benefits and constraints of this asset class to help investors make informed decisions that balance risk and opportunity.

The widespread adoption of ELTIF 2.0 could advance the EU’s Capital Markets Union (CMU), which aims to deepen and integrate European capital markets, delivering new sources of funding and growth. By unlocking private capital, ELTIFs can help address Europe’s investment needs generated by the twin – green and digital – transition. The Draghi report highlights the importance of mobilizing private capital to achieve the latter and bolster Europe’s competitiveness.

Smart policy solutions can accelerate this process. France’s Industrie Verte law offers a concrete example of how regulation can help amplify private market activity. By requiring insurers to allocate a portion of life insurance and pension savings to unlisted assets, the French government has taken a significant step to support this growing trend, with €4.7 billion already committed to ELTIFs in France by the end of 2023.6 ELTIF 2.0 is more than a mere policy update or financial innovation – it’s a powerful tool for channelling capital into the EU’s strategic priorities. For Europe to thrive in an era of rapid change, it must harness the full potential of private markets to create a pathway to greater competitiveness, innovation and resilience. ELTIF 2.0 provides an effective framework to do just that, help empowering retail investors to play a role in building a more prosperous and sustainable future for the region.

Disclaimer

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or financial product or to adopt any investment strategy. The opinions expressed are as of January 2025 and may change as subsequent conditions vary. There is no guarantee that any forecasts will come to pass.

Capital at risk

The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Artificial Intelligence (AI) Risk

Companies in AI-related businesses will be subject to risks associated with developing technology and will face intense competition which may have an adverse effect on profit margins. It is likely that these companies will also rely heavily on Patents and other proprietary rights and any loss of, or limitation on their ability to enforce, such proprietary rights in the future could have a material adverse effect on their profitability. Certain AI technology features may also increase the risk of fraud or cyberattack.

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Our senior executives and experts share their views on critical issues shaping Europe’s economy and investment opportunities. We also take a closer look at key EU financial services policy developments affecting European investors and explore how capital markets can contribute to long-term financial well-being and growth across the continent.
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