Financial services: asset management and investment funds Norway

Regulation (EU) 2015/760 on European long-term investment funds (ELTIFs) will, after quite some delay, enter into force in Norway on 1 January 2023.[1] This was announced by the Norwegian Ministry of Finance on 16 December 2022. However, almost at the same time the EU has proposed an updated regulation in order to make these investment funds more attractive. We therefore hope that the implementation of such revised regulation, once adopted, will be implemented also in Norway in a swifter manner than the original regulation.

ELTIFs are a special category of alternative investment funds dedicated to long-term investments, such as infrastructure projects and certain real estate assets, which may be distributed on a cross-border basis to both professional and retail investors.

The ELTIF regulation was originally aimed to support the development of EILTFs as an alternative long-term investments vehicle for both professional as well as retail investors, and enhance long-term investments in the economy as a whole. From a Norwegian perspective, it would provide wider marketing access to retail investors and also lending possibilities compared to a "normal" alternative investment fund.

However, in order to qualify as an ELTIF-fund, it must comply with detailed rules and restrictions, including rules on eligible assets and investments, diversification and portfolio composition. The strict requirements have made the ELTIF-fund unattractive for most asset managers, and we have across the EU only seen a limited number of ELTIFs been launched. These challenges combined with an ambition from the EU to channel more financing to SMEs and long-term projects and also to enhance the role of retail investors by making ELTIFs more attractive to them, has led to a proposal for an updated ELTIF regulation published 7 December 2022 seeking to make ELTIF-funds more attractive to asset managers and investors. ELTIFs are also, given the long-term nature of the product, seen to be well placed to help finance the green transition.

The main adjustments set out in the proposal are related to the following:

• The definition of "Real assets" is broadened – this may lead to ELTIFs being a more attractive product for real estate fund managers
• The portfolio composition requirement of 70% in eligible investment assets is reduced to 55%, providing greater flexibility
• Increased maximum investment into a portfolio company from 10% to 20%
• The introduction of master-feeder structures
• Differentiated borrowing restrictions depending on whether the ELTIF is marketed to retail investors or only professional investors
• The scope of collective investment undertakings in which ELTIFs can invest will be broadened
• Wider marketing possibilities to retail investors with the deletion of in particular the requirement related to a financial instrument portfolio of EUR 500 000 and the 10% threshold. However, new suitability requirements are introduced.

Schjødt recently opened its Danish office in Copenhagen. The Copenhagen office is fully integrated with Schjødt's existing offices, and will operate in accordance with the values, commitment and commercial mindedness that have enabled us to develop and succeed in Norway and Sweden, and in the UK. Schjødt provides advice for asset managers and investment funds in Norway, Sweden and Denmark. Should ELTIFs (or other asset management/investment funds matters) be of interest, not only in Norway, please do not hesitate to reach out.

[1] Ikrafttredelse av endringer i verdipapirfondloven og AIF-loven