ALFI responds to ESMA RTS under the revised ELTIF Regulation

ALFI responded to the ESMA Consultation Paper on the draft regulatory technical standards under the revised ELTIF Regulation, providing detailed feedback on various aspects of the proposed regulations.
Regarding the assumptions made in relation to the ELTIF cost ratio figures, ALFI suggests that these assumptions need to be reworked to consider the specificities of the alternative asset classes in which ELTIFs invest. ALFI also highlights that cost ratio figures may be confusing for investors, especially during the initial investment phase of the ELTIF. ALFI recommends allowing for explanatory disclosures rather than fixed conditions of cost presentation to enhance transparency.
ALFI agrees that cost information in the KID and the ELTIF prospectus should be consistent, and the rationale for different methods of calculating and presenting costs should be clearly explained to investors. ALFI suggests that estimated annual cost forecasts should be provided, emphasizing that these costs are only estimates.
In terms of the types of costs mentioned in the consultation paper, ALFI believes that transactional costs and costs related to investments should be excluded from the category of costs expressed as a percentage of the capital. ALFI suggests indicating estimates per category of cost in the prospectus, with a clear reference to the annual reporting for more accurate information.
ALFI disagrees with the proposal that the types of costs mentioned in paragraph 33 are fixed costs. They argue that assumptions on the duration of the investment are misleading, especially for open-ended ELTIFs with continuous fund raising and outflows. ALFI recommends aligning the redemption policy with the investment strategy and investment universe of the ELTIF, rather than making it dependent on the expected community of investors.
ALFI supports the proposed amendments to Article 18(6) of the ELTIF Regulation but suggests that the term „on a weighted basis“ is not necessary. They also disagree with some of the proposals in Article 3(2) of the draft RTS, which they believe are inconsistent with the structuring possibilities of ELTIFs.
Regarding the criteria to assess the percentage referred to in Article 18(6)(d), ALFI believes that the definition of the percentage should be under the responsibility of the manager.
ALFI agrees with the principle-based approach suggested for the ESMA RTS under Article 19(2a) and proposes drafting amendments to Articles 7-9 of the RTS to implement proposed changes.
Finally, ALFI supports ESMA’s proposal for a principle-based approach to the transfer process for both exiting and potential investors, but believes that ESMA is going beyond the required specifications for the use of matching.