Side Letter: ELTIF 2.0; asset owners’ ‘polycrisis’; Gen Z’s impact potential

Monday is Presidents' Day in the US, so we'll keep today's brief... brief. To start the week: the EU is overhauling its long-term investment funds; global asset owners should brace for a potential "polycrisis"; and pensions should engage Gen Z on impact investing. For our valued subscribers only.

Just happened

The EU: giving ELTIFs a makeover (Source: Getty)

In case you missed it, the European Parliament last week voted to approve highly anticipated amendments for long-term investment funds (ELTIFs). The amendments, known as ELTIF 2.0, aim to “increase the uptake of ELTIFs across the EU” and make it easier for companies to access long-term financing. Private Equity International unpacked these changes in our February issue (read it here); essentially they’ll provide ELTIFs with greater flexibility and scope in eligible investment strategies, while making them easier to set up and market to retail clients.

Industry participants have welcomed the move. Invest Europe’s public affairs director Martin Bresson said in a statement: “By listening to our industry’s requests, European policymakers have transformed an ill-fitted label into a passport of choice for Europeans looking to invest their capital into sustainable and innovative projects.”

West Lockhart, head of wealth and family offices for BlackRock Alternatives in EMEA, said it “marks a material step forward in the distribution and adoption of the ELTIF in Europe… and offers a broader range of investors access to the benefits of private markets within a robust investor protection framework”.

The revised regulation is expected to be published in the Official Journal of the EU in March and take effect in the first quarter of 2024.

They did the math

Pension ‘polycrisis’
Willis Towers Watson’s latest Global Pension Assets Study doesn’t make for particularly cheery reading. “Asset owners may find the next period uncomfortable”, it warns, citing heightened macro uncertainty, geopolitics and “systemic risks” from climate, environmental and social sources. There’s even potential for a rather ominous sounding global “polycrisis”, “where systemic risks combine and synchronise with consequences for risk amplification and acceleration”. Against this backdrop, alternative assets are expected to play an important role in future portfolios, given their long-term horizon and low correlation to traditional asset classes.


Appealing to Gen Z
The pensions industry could be doing more to channel capital towards impact investments. That’s according to a report from impact VC firm Future Planet Capital, digested by our colleagues at New Private Markets (registration required). The report presents a shopping list of measures that the report authors believe will “unleash capital from institutional investors and scale up impactful investing to solve global issues of climate change, education, health, security and sustainable growth”. One of these measures involves targeting “specific demographics within pensions” – particularly those marketed toward younger millennials and Generation Z.

Nat Wei, a member of the UK’s House of Lords and a serial social entrepreneur, told NPM that there is in opportunity “to engage the millennials and ‘Gen Z’ more”. “I think the priorities of the younger generation, and the time horizons they have, are different from those who are just about to retire… I don’t see enough products being developed in the pension industry [aimed] at that very new kind of customer or saver.”

Dig deeper

LP meetings. It’s Monday, so here are some LP meetings to watch out for this week.

20 February

21 February

22 February

23 February

24 February

Today’s letter was prepared by Alex Lynn with Carmela Mendoza.