ELTIF vs. UCITS vs. EuVECA: Choosing the Right Vehicle for Alternative Assets

Fund managers developing investment products in Europe face an important decision: which regulatory framework best fits their investment strategy, target investors, and liquidity requirements?

Three frameworks are particularly relevant: 

• Undertakings for Collective Investment in Transferable Securities (UCITS¹)
• European Long-Term Investment Funds (ELTIFs²)
• European Venture Capital Funds (EuVECAs³). 

All three allow investors to pool capital, but they serve different purposes. 

ELTIF vs. UCITS vs. EuVECA compared side-by-side

Here are the main differences between the vehicles for alternative assets.

Let’s take a closer look at them individually. 

UCITS: Designed for liquid investments

UCITS is one of Europe’s established frameworks for regulated investment funds such as mutual and exchange-traded funds (ETFs). 

Under the UCITS Directive⁴, funds can invest in eligible transferable securities, money market instruments, and other permitted assets. 

They have to comply with rules on diversification, risk management, and liquidity. 

This framework suits strategies built around listed equities, bonds, and other financial instruments that can generally be traded or valued regularly.

Liquidity and investor access

UCITS investors can request the redemption of their units, subject to applicable rules and permitted exceptions. Many funds offer daily dealing, although dealing schedules and settlement periods vary by product. 

This arrangement suits investors who want relatively frequent access to their money. 

However, daily dealing does not guarantee immediate payment in every circumstance. Funds may suspend redemptions in exceptional situations, and difficult market conditions can affect their ability to sell assets.

UCITS also offers a cross-border marketing passport. Once the relevant authorisation and notification requirements are met, a fund can generally be marketed in other EU Member States without obtaining separate fund authorisation in each country.

When to consider UCITS: This framework suits managers whose strategies focus on eligible liquid assets and whose investors expect frequent dealing. It is also appropriate for products intended for distribution across European markets.

ELTIF: Access to long-term investments

A European Long-Term Investment Fund (ELTIF)² is designed to direct capital towards long-term investments in the real economy. Its eligible assets can include infrastructure, real estate-related investments, private debt, and equity or debt instruments issued by qualifying businesses. 

Depending on the strategy, these investments can support projects that require substantial capital and several years to generate returns.

The original ELTIF framework was introduced in 2015. Its revised version, known as ELTIF 2.0², has been in effect since 10 January 2024. The reform expanded the range of eligible investments, changed portfolio requirements, and removed certain barriers to retail participation.

The 55% investment requirement

Under the original ELTIF rules, funds generally had to invest at least 70% of their capital in eligible investment assets. ELTIF 2.0 lowered this threshold to 55%.

The change gives fund managers more flexibility when building portfolios and managing liquidity. However, the remaining portfolio is still subject to regulatory requirements. It cannot simply be invested in any asset without regard to the rules.

ELTIF 2.0 also broadened the types of investments that can qualify. Depending on the applicable conditions, funds can invest in eligible private companies, real assets, certain securitisations, and other permitted investment funds.

This flexibility makes ELTIF relevant to strategies that would not fit comfortably within the standard UCITS investment universe.

Can retail investors invest in an ELTIF?

Yes. ELTIFs can be marketed to both retail and professional investors. ELTIF 2.0 removed the former general €10,000 minimum investment requirement for retail investors. This made the framework more accessible to individuals who want exposure to long-term assets.

However, retail investors remain subject to several protection requirements:

• Suitability assessment. Fund managers or distributors must assess investors’ financial situation, investment objectives, knowledge, experience, and risk tolerance.
• Risk disclosures. Investors must receive a prospectus and a Key Information Document (KID)⁵ outlining the fund’s risks, costs, and key features.
• Explicit consent. If an investment is deemed unsuitable, the investor’s explicit consent is required to proceed in applicable non-advised sales.
• Right to cancel. Investors can cancel their subscription without penalty during the subscription period and for two weeks after signing the initial agreement.
• Complaint handling. Fund managers must have procedures for handling retail investor complaints in the relevant EU Member State’s official language.

These safeguards help retail investors understand the risks and long-term nature of ELTIFs before committing their money.

Are ELTIFs liquid?

Not always. An ELTIF may have a fixed term and prevent investors from withdrawing their money before maturity. Some ELTIFs allow early withdrawals, but only under specific conditions. This is because long-term assets, such as infrastructure projects, private loans, and unlisted companies, can be difficult to sell quickly.

Fund managers must set redemption terms that reflect the liquidity of the underlying assets. If too many investors request their money at the same time, the fund may struggle to meet those requests.

When to consider ELTIF: This framework suits managers who want to offer long-term investments to retail or professional investors and can meet the relevant regulatory and operational requirements.

EuVECA: Focused on venture capital

The European Venture Capital Fund (EuVECA) framework⁶ is designed for qualifying venture capital funds. It suits funds that invest in eligible startups, small businesses, and growing companies. 

Under Regulation (EU) No 345/2013⁷, at least 70% of a qualifying EuVECA fund’s investible capital must go into qualifying investments. The remaining capital is subject to rules on permitted assets. 

This is a more specialized investment mandate than ELTIF’s. A fund investing broadly in infrastructure, property, or private debt would not qualify as a EuVECA simply because it holds illiquid assets.

Who can invest in a EuVECA?

EuVECA funds can be marketed to professional investors and who meet the conditions set out in the EU’s EuVECA Regulation.

Eligible investors include:

• Professional clients, such as banks, investment firms, insurance companies, and qualifying large businesses.
• Other investors, including wealthy individuals who do not qualify as professional clients, provided they meet the €100,000 minimum investment requirement and acknowledge the risks in writing.
• Fund insiders, such as executives, directors, and employees involved in managing the fund manager, who invest in the EuVECA funds their manager operates. These investors are exempt from the two conditions above.

Non-professional investors using the specified route must generally commit at least €100,000 and sign a separate document acknowledging the investment risks. This minimum does not apply to every EuVECA investor. It applies to the specific category of non-professional investors covered by the regulation. EuVECA also allows qualifying funds to be marketed across the EU, subject to the relevant registration and notification requirements.

When to consider EuVECA: This framework suits managers who focus on qualifying venture capital investments and want to reach professional investors or other eligible investors.

How AIFMD affects ELTIF and EuVECA

UCITS has its own regulatory framework. ELTIFs and EuVECAs, on the other hand, are specialized frameworks for alternative investment funds. The Alternative Investment Fund Managers Directive (AIFMD)⁸ sets rules for alternative fund managers. These cover authorisation or registration, risk management, regulatory reporting, and depositary arrangements where applicable.

The subsequent AIFMD II amendments, Directive (EU) 2024/927⁹, address areas including liquidity management, delegation, and loan-originating funds. Managers should check the relevant national implementation and application dates when assessing their compliance obligations.

How to launch an alternative investment fund with LenderKit

Choosing the right regulatory framework is the first step in launching an alternative investment vehicle. Fund managers must also plan how the fund will operate, onboard investors, handle reporting, and meet ongoing compliance requirements.

The right technology can help bring these processes together. 

LenderKit provides white-label investment and crowdfunding software to help businesses build and manage digital investment platforms. Its features include investor portals, deal management, identity verification, payment integrations, document management, e-signatures, and reporting tools. 

Customisation options and integrations help adapt the platform to specific business needs.

Whether you’re launching a real estate investment platform, a private investment portal, or a crowdfunding business, LenderKit can help provide the digital infrastructure you need.

Contact our team to discuss your investment platform requirements and explore the right solution for your business.