What do providers of ELTIFs advertise with?
Due to the new regulations, ELTIFs are being promoted more intensively. Providers emphasize that investors can invest in unlisted companies, credit funds and infrastructure with even smaller amounts.
They also advertise that with an ELTIF you can… Support energy transition or in Infrastructure projects with high investment requirements can invest. All of this should bring attractive returns. Sometimes it is even claimed that ELTIFs could be the new ETFs (Exchange Traded Funds). Prospect of double-digit returns.
The consumer advice centers are particularly critical of this last point. The higher the possible returns, the greater the risk.
Note: Agents get a commission if they sell you an ELTIF. Therefore, remain skeptical. The intermediary could also offer you the product out of his own interest.
This is how ELTIFs work
Before you decide on a form of investment, you should inform yourself thoroughly and weigh up the advantages and disadvantages:
- ELTIFs are long-term investments in real assets.
- Closed ELTIFs can have terms of up to 30 years, while open ELTIFs have no such upper limit.
- ELTIFs can invest up to 20 percent in a single investment, providing some diversification. However, they are not as broadly diversified as, say, an ETF that invests in hundreds or thousands of companies.
- It is sometimes possible to redeem shares early, but the conditions vary, for example due to holding periods. Providers may have different regulations on this. Therefore, you should take a close look at how long your money is fixed for.
- Since these are unlisted companies, a stock market sale is not possible. You still need a depot.
- As with all forms of investment, you should consider the costs carefully. For private investors one can Issue surcharge of up to 5 percent become due. Many funds also charge a performance fee. Funds of funds in particular are often particularly expensive.
- Return promises or targets with an ELTIF are not guaranteed and are not a binding commitment like the agreed interest rate for a fixed-term deposit.
The consumer advice centers warn against this
According to consumer advice centers, ELTIFs are particularly suitable for institutional and professional investors, but not for inexperienced private investors. To get involved in companies, you need expertise. You should be able to realistically assess the chances of success. However, these are difficult to predict, especially in early phases.
Although you can achieve high returns, you also take on a lot of risk. ELTIFs do not provide the broad diversification that ETFs offer. This is particularly important for inexperienced private investors in order to keep risks low.
Although the new EU regulation makes it easier to access ELTIFs, it also poses the risk that you will invest in products that do not fit your risk and knowledge profile. Alternative investments in real assets are often more suitable: For example, a stock ETF on the MSCI World.
Private investors should therefore think carefully about whether ELTIFs are really an option for their own investments. If you still want to invest in ELTIFs, consumer advice centers recommend doing so only as a small part of a broad portfolio. So up to five percent of total assets, and only with capital that is not needed in the short and medium term. You should be able to financially cope with a possible loss without jeopardizing your own financial life plans.
