LUXEMBOURG Trends and Developments Contributed by: Claire Guilbert, Geoffroy Hermanns and Cyril Clugnac, Norton Rose Fulbright
lengthy. It started in December 2023 with the first version of the RTS published by ESMA, upon which both institutions kept passing the buck, with the European Commission giving ESMA an unusual six-week ultimatum to amend its draft to address the European Commission’s concerns (in particular the need to provide ELTIF manag - ers with greater flexibility in terms of liquidity management). This was followed by the publi - cation of an ESMA opinion in April 2024 setting out a number of changes to the draft RTS, and the European Commission circulating in essence its own draft for internal consultation, which was finally approved in July 2024. With the lapse of the three-month scrutiny period, the RTS were published in the Official Journal of the EU on 25 October 2024 in the form of Commission Del - egated Regulation (EU) 2024/2759 of 19 July 2024 (the ELTIF 2.0 RTS) and came in force the day after. The ELTIF 2.0 RTS supplement Articles 9(3), 18(6), 19(5), 21(3) and 25(3) of ELTIF 2.0, bringing much needed specifications concern - ing their application. The two core subjects dealt with by ELTIF 2.0 are liquidity and redemption. Under ELTIF 2.0, an ELTIF manager may permit investors to redeem their participation during the life cycle of the ELTIF under certain conditions, provided that the manager demonstrates that the ELTIF has an “appropriate redemption policy and liquid - ity management tools that are compatible with the long-term investment strategy of the ELTIF” and that it provides a list of information to the competent authority of the ELTIF at the time of authorisation, as listed in Article 4 of the ELTIF 2.0 RTS. While the ELTIF 2.0 RTS do not specify the length of the minimum holding periods pri - or to redemption requests, they do require the ELTIF manager to determine a minimum holding period based on:
• the long-term nature and investment strategy of the ELTIF; • the ELTIF’s underlying asset classes, their liquidity profile and their position in the life cycle; • the ELTIF’s investment policy; and • the ELTIF’s investor base. Furthermore, the maximum percentage of liquid assets that can be used for redemption requests is required to be calibrated by the ELTIF man - ager at its discretion, on the basis of one of two sets of factors set out in the ELTIF 2.0 Annexes (ie, on the basis of either the ELTIF’s redemption frequency and notice period or its redemption frequency and minimum percentage of liquid assets). In addition, the ELTIF 2.0 RTS define: • the circumstances in which the use of deriva - tives for hedging purposes is permitted; • the circumstances in which the life of an ELTIF can be considered compatible with the life cycles of its individual assets; • the policy requirements for the full or partial matching of transfer requests by exiting and new investors; and • the calculation methodologies and presenta - tion of costs of an ELTIF. All in all, the ELTIF 2.0 RTS tackle most of the problems raised by their first iteration, and the road is now clear for ELTIFs to move forward in their 2.0 format. The much-needed revamp of Commission de Surveillance du Secteur Financier Circular 02/77 In 2002 – ie, more than 20 years ago, Commis - sion de Surveillance du Secteur Financier (CSSF) established its framework on the protection of
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