Private Equity ELTIF
The power to explore new horizonsPrivate markets are becoming more accessible
The need for returns, a regular income and diversification have brought private markets to the forefront, and a major shift is taking place.
This process is accelerating amongst investors globally. Regulations, technology and product innovation are supporting the development of new funds designed around private investor needs.
New investment solutions, like the European Long Term Investment Fund (ELTIF), are being developed to unlock access.
What are ELTIFs?
European Long-Term Investment Funds, or ELTIFs, are a type of collective investment framework allowing investors to put money into companies and projects that need long-term capital. They are designed to increase the amount of non-bank finance available for companies investing in the real economy of the European Union.
At least 70% must be invested in unlisted opportunities needing long term capital such as small and medium sized companies or infrastructure projects.
To get the most out of the investments in these very complex markets, it’s crucial to rely on a trustworthy asset manager with a strong track record.
Benefits for investors
Increased Access
Providing access to private markets investments to a wider audience thanks to low minimum investment thresholds.
Direct Ownership
Actively engaging with private companies gives the opportunity to promote more sustainable business practices and behaviours.
Portfolio Diversification
Investing in unlisted companies and projects that are not accessible through public markets provides diversification benefits.
Long-term Returns
ELTIFs provide investors with attractive returns from complex investment opportunities by deploying appropriate skills.
Regulated Structure
ELTIFs can be offered only by an authorised manager under the EU’s Alternative Investment Fund Managers Directive (AIFMD) and is subject to its rules
Sustainability
It could help in meeting sustainability investment goals - i.e. SFDR Art. 8* ELTIF.
Schroders Capital Private Equity ELTIF 2023
The fund aims to provide capital growth with an emphasis on development engine of European economy focusing on small- and mid- buyout and growth strategies. The focus on small and medium buyouts gives the ELTIF a distinction to other private equity funds that tend to have a bias toward large buyouts - where correlation to the public markets is higher - and requires specialized skills to realize full potential.
With a minimum initial subscription of € 10,000, it provides access to private equity investments without requirement to invest large amounts or to be a professional investor.
It promotes sustainable business practices and behaviours (Article 8 Fund under SFDR*).
For subscribing, please contact your advisor.
*An Article 8 Fund under SFDR is defined as “a Fund which promotes, among other characteristics, environmental or social characteristics, or a combination of those characteristics, provided that the companies in which the investments are made follow good governance practices”.
No assurance can be provided upon favorable investment outcomes.
Why Private Equity?
At its core Private Equity just means investing in companies that are not listed on the stock market. It may help diversify portfolio’s supporting entrepreneurs and family owned business.
Accessibility
Listed companies are only the tip of the economic iceberg. Private equity allows access to different parts of the economic ecosystem than public markets do.
Value-driven
Value is created through business transformation and by exploiting pricing inefficiencies observed in mainly small and medium sized companies that are sourced from families and entrepreneurs (e.g. in Europe, over 60% of deals in small buyouts are with families).
Complexity premium is the new illiquidity premium
Illiquidity is an active choice by investors and offers the opportunity to access the benefits of private markets. Returns are generated by the convergence of a unique situation or opportunity and a corresponding skillset which gives rise to a complexity premium.
Long term outlook
A long term objective allows for strategic change and growth without the pressure of quarterly earnings reporting.
Sustainability
Actively engaging with private companies gives the opportunity to promote more sustainable business practices and behaviours. Thriving small and medium size enterprises are beneficial to the long term wellbeing of our society.
INFOGRAPHIC
How does private equity work?
INFOGRAPHIC
What’s a co-investment and how does it work?
About Schroders Capital
Schroders Capital is the private markets investment division of Schroders, the global asset management group.
Schroders Capital is a business built to provide investors with access to a broad range of private markets investment opportunities, portfolio building blocks and customised private markets strategies. Its team has been operating in private markets for over two decades, focusing on delivering best-in-class, risk-adjusted returns and executing investments through a combination of direct investment capabilities and broader solutions in all private market asset classes, through co-mingled funds and customised private markets mandates.
The team aims to achieve sustainable returns through a rigorous approach and in alignment with a culture characterised by performance, collaboration and integrity.
Schroders Capital offers a diversified range of investment strategies, including real estate, private equity, infrastructure, securitised products and asset-based finance, private debt, insurance-linked securities and impact.
Videos | Unlocking private markets
What does the ‘democratization of private markets’ really mean?
Accessing private markets investment opportunities can be an attractive option for individual investors looking for new sources of returns and diversification. But what are they all about?
What is an ELTIF and what role does it play?
Private markets have always been the realm of professional investors. But now there are options available that have not been in the past. How can individual investors access private markets today?
Insights
What are the risks?
While private equity investments offer potentially significant capital returns, funds and companies may face business and financial uncertainties. There can be no assurance that their use of the financing will be profitable to them or to any Fund. Investing in private equity and venture capital funds and unlisted companies entails a higher risk than investing in companies listed on a recognised stock exchange or on other regulated markets. This is in particular because of the following major risk factors:
Currency risk
The fund may lose value as a result of movements in foreign exchange rates, otherwise known as currency rates.
Interest rate risk
The fund may lose value as a direct result of interest rate changes.
Liquidity risk
The fund invests in illiquid instruments, which are harder to sell. Illiquidity increases the risks that the fund will be unable to sell its holdings in a timely manner in order to meet its financial obligations at a given point in time. It may also mean that there could be delays in investing committed capital into the asset class.
Market risk
The value of investments can go up and down and an investor may not get back the amount initially invested.
Operational risk
Operational processes, including those related to the safekeeping of assets, may fail. This may result in losses to the fund.
Private Equity risk
Private equity strategies are subject to a variety of risk conditions, including, but not limited to, the risk that too much is paid for acquiring a business, new or unproven management, new or less mature business strategies or unsuccessful integration with existing businesses.
Sustainability risk
The fund has environmental and/or social characteristics. This means it may have limited exposure to some companies, industries or sectors and may forego certain investment opportunities, or dispose of certain holdings, that do not align with its sustainability criteria chosen by the investment manager. The fund may invest in companies that do not reflect the beliefs and values of any particular investor.
Tax risk
The Fund and its returns may rely on certain available tax efficiencies at the inception of the Fund which may be subject to changes in tax treatment or interpretations. Any change in the actual or perceived tax status or exposure of the Fund or its investments as well as in tax legislation, practice or in accounting standards could adversely affect the anticipated level of taxation.
Valuation risk
The valuation of private asset investments is performed on a less frequent basis than listed securities. In addition, it may be difficult to find appropriate pricing references for private asset investments. This difficulty may have an impact on the valuation of the portfolio of investments. Certain investments are valued on the basis of estimated prices and therefore subject to potentially greater pricing uncertainties than listed securities.
Performance risk
Investment objectives express an intended result but there is no guarantee that such a result will be achieved. Depending on market conditions and the macro-economic environment, investment objectives may become more difficult to achieve.