Introduced in 2015, the ELTIF is a regulatory wrapper that gives closed-ended private assets funds a single passport to be marketed to private wealth investors across the EU. ELTIFs invest in long-term equity and debt investments in the real economy of the EU and beyond, while being under the protection of a dedicated European regulatory regime.
A design that breaks down barriers to entry.
The ELTIF is the first wrapper that allows a scalable and regulated pan-European distribution of private markets investments across different investor types. This stands in stark contrast to the traditional approach of creating individual wrappers per jurisdiction.
Moreover, the EU has recently approved changes to make the ELTIF vehicle even more attractive by providing greater flexibility regarding eligible assets and simplifying access.1
Driving Europe's economic growth.
The EU views the ELTIF as a powerful vehicle to boost investment in infrastructure and other long-term projects and businesses - both within the real economy of the EU and beyond. As such, investors in ELTIFs provide local companies and infrastructure with additional financing, driving economic growth within the EU.
Democratising private markets for European investors.
Adding private markets to a clients' portfolios may lead to increased diversification, enhanced returns and a hedge against inflation. It also provides the opportunity to invest in tangible and socially responsible undertakings, such as wind farms, schools, hospitals, or SMEs.
Risk: Diversification and asset allocation may not fully protect you from market risk.
1 EFAMA, February 2023.
Private markets investments are investments that are not readily available in public markets. Their underlying risks are uncorrelated or less correlated with traditional investments such as listed bonds or equities. The low correlation with traditional asset classes provides an opportunity to diversify portfolios, reducing overall risk exposure across investments.
Risk: Diversification and asset allocation may not fully protect you from market risk.
The capital could be put toward a privately-owned clothing company based in Italy which prefers to work privately without going to public markets. This new source of capital will help this Italian clothing company better realise its potential, drive growth, and stimulate employment while remaining independent.
The capital can also be used to help a wind farm developer who buys real estate and contracts with construction companies to build wind turbines. These turbines will generate electricity that can be sold to utility companies. This investment chain puts money directly into the 'real economy', creating employment and stimulating economic activity in the region.
Investing in renewable power can also drive measurable and comparable impacts on local communities. Other infrastructure projects examples include ports, streets, pipelines and/or communication networks.
Private markets investments, especially real assets (infrastructure and real estate), have the potential to deliver long-term stable cash yield throughout a varied market cycle.
The capital could be put toward a privately-owned clothing company based in Italy which prefers to work privately without going to public markets. This new source of capital will help this Italian clothing company better realise its potential, drive growth, and stimulate employment while remaining independent.
The capital can also be used to help a wind farm developer who buys real estate and contracts with construction companies to build wind turbines. These turbines will generate electricity that can be sold to utility companies. This investment chain puts money directly into the 'real economy', creating employment and stimulating economic activity in the region.
Investing in renewable power can also drive measurable and comparable impacts on local communities. Other infrastructure projects examples include ports, streets, pipelines and/or communication networks.
Real assets investments are investments in physical assets such as wind farms, offices, warehouses, airports, etc. Investing in such 'real' assets may be a useful addition to the toolkits for those looking to mitigate the impact of inflation during inflationary environments. For example, infrastructure projects frequently have their revenues linked to an inflation index. This means that when the inflation goes up, the revenues will also go up, mitigating inflation.
The capital could be put toward a privately-owned clothing company based in Italy which prefers to work privately without going to public markets. This new source of capital will help this Italian clothing company better realise its potential, drive growth, and stimulate employment while remaining independent.
The capital can also be used to help a wind farm developer who buys real estate and contracts with construction companies to build wind turbines. These turbines will generate electricity that can be sold to utility companies. This investment chain puts money directly into the 'real economy', creating employment and stimulating economic activity in the region.
Investing in renewable power can also drive measurable and comparable impacts on local communities. Other infrastructure projects examples include ports, streets, pipelines and/or communication networks.
In addition to their diversifying nature, allocations made to private market have the potential to increase a portfolio's total return as private markets have historically been able to outperform their public market equivalents:
Private Equity
Annualised return of private equity manager universe vs. global equities.2
Private Equity represented by the Burgiss Private Equity Manager Universe for the 20-year period ending 3/31/22. Burgiss data reflects quarterly time-weighted returns.
Private credit
Annualised return of private credit vs U.S. bonds.2
Private Credit represented by the Cliffwater Direct Lending Index. Private credit reflects rolling quarterly returns and most recent return from 9/30/15 (index inception) to 3/31/22 (latest available data). Refer to the end of the page for additional details of US aggregate which are US bonds indices.
Past performance does not guarantee or indicate future results. Index performance is shown for illustrative purposes only. It is not possible to invest directly in an unmanaged index.
Asset class comparison is used to demonstrate private market performance compared to public market performance during comparable time periods. There are material differences in individual index/ manager universe methodologies (both public and private) and differences in the way public and private market performance is calculated; the comparisons shown may not fully reflect these differences. In general, public market indexes are unmanaged, represent a group of constituent securities which may change over time, reflect the reinvestment of dividends but do not reflect the deduction of any fees or expenses. Private market manager universes and indices often rely on self-reporting by managers. Therefore, there may be survivorship bias given that fund managers have discretion to report, or to discontinue reporting for various reasons (e.g. due to liquidation), and therefore private market manager universes and indices may reflect a bias towards funds with track records of success. Private Equity represented by the Burgiss Private Equity Manager Universe for the 20-year period ending 30/09/22. Burgiss data reflects quarterly time-weighted returns. Burgiss data is sourced from limited partners of these private funds and calculates results net of fees and carried interest, providing results that are updated and published on a quarterly basis. Private Credit represented by the Cliffwater Direct Lending Index. Private credit reflects rolling quarterly returns and most recent return from 30/09/15 (index inception) to 31/12/22 (latest available data). For more information on the individual indexes, please scroll down to the end of the webpage.
Illiquidity premia
As private market investments do not offer regular liquidity they are typically held for multiple years and deemed illiquid. However, this illiquidity may not be a bad thing as investors may benefit from the illiquidity premium, which tends to result in higher expected returns.
Risk: The investments may have low liquidity which often causes the value of these investments to be less predictable. In extreme cases, the investments may not be able to realise the investment at the latest market price or at a price considered fair.
Complexity premia
As private markets investments are typically non-standardised, investment managers need to navigate material complexity when making an investment. The complexity premium is the compensation associated with negotiating, structuring and underwriting private deals, which requires scale and experience.
BlackRock Alternatives reviews approximately 9.000 deals annually with a ~5% deployment rate3 thanks to its scale and position in the global capital markets and information advantage.4
2 For additional information about the indexes/universe, please scroll down to the end of the page. Asset class comparison is used to demonstrate private market performance compared to public market performance during comparable time periods. There are material differences in individual index/ manager universe methodologies (both public and private) and differences in the way public and private market performance is calculated; the comparisons shown may not fully reflect these differences. In general, public market indexes are unmanaged, represent a group of constituent securities which may change over time, reflect the reinvestment of dividends but do not reflect the deduction of any fees or expenses. Private market manager universes and indices often rely on self-reporting by managers. Therefore, there may be survivorship bias given that fund managers have discretion to report, or to discontinue reporting for various reasons (e.g. due to liquidation), and therefore private market manager universes and indices may reflect a bias towards funds with track records of success. Private Equity represented by the Burgiss Private Equity Manager Universe for the 20-year period ending 3/31/22. Burgiss data reflects quarterly time-weighted returns. Burgiss data is sourced from limited partners of these private funds and calculates results net of fees and carried interest, providing results that are updated and published on a quarterly basis. Private Credit represented by the Cliffwater Direct Lending Index. Private credit reflects rolling quarterly returns and most recent return from 9/30/15 (index inception) to 3/31/22 (latest available data).
3 2022 year-end figure.
4 BlackRock, as of 30 December 2022.
The capital could be put toward a privately-owned clothing company based in Italy which prefers to work privately without going to public markets. This new source of capital will help this Italian clothing company better realise its potential, drive growth, and stimulate employment while remaining independent.
The capital can also be used to help a wind farm developer who buys real estate and contracts with construction companies to build wind turbines. These turbines will generate electricity that can be sold to utility companies. This investment chain puts money directly into the 'real economy', creating employment and stimulating economic activity in the region.
Investing in renewable power can also drive measurable and comparable impacts on local communities. Other infrastructure projects examples include ports, streets, pipelines and/or communication networks.
BlackRock was one of the first movers to offer ELTIFs to retail and institutional investors in Europe and has successfully grown its platform to four ELTIFs across private equity and private infrastructure so far. BlackRock's ELTIF platform aims to regularly launch new private market ELTIFs to its European client base.
Previous ELTIF fundraises:
In the more than seven years since its introduction to the European private markets, the ELTIF (European Long Term Investment Fund) has demonstrated its value and versatility to investors, and we expect rapid growth in the coming years.
Risk: The investments may have low liquidity which often causes the value of these investments to be less predictable. In extreme cases, the may not be able to realise the investment at the latest market price or at a price considered fair.
The Cliffwater Direct Lending Index (CDLI) is an index that assists investors to better understand private credit as an asset class. The CDLI seeks to measure the unlevered, gross of fees performance of U.S. middle market corporate loans, as represented by the underlying assets of Business Development Companies ("BDCs"), including both exchange-traded and unlisted BDCs, subject to certain eligibility criteria. The CDLI is an asset-weighted index that is calculated on a quarterly basis using financial statements and other information contained in the U.S. Securities and Exchange Commission ("SEC") filings of all eligible BDCs. Eligibility is set as all assets held by BDCs that (1) are regulated by the SEC as a BDC under the Investment Company Act of 1940; (2) have a substantial majority (approximately 75%) of reported total assets represented by direct loans made to corporate borrowers, as categorized by each BDC and subject to Cliffwater's discretion, and (3) file SEC form 10-Q (or 10-K, as applicable) within 75 (or 90) calendar days following the current Valuation Date. If a BDC meets the eligibility criteria, but has not filed its report on Form 10-K or 10-Q with the SEC at the time the index is reconstituted, asset information from its report will be included in the index at the time of the next reconstitution. This information is derived from sources that are considered reliable, but BlackRock does not guarantee the veracity, currency, completeness or accuracy of this information.
The Cliffwater Direct Lending Index (CDLI) is included within this document to demonstrate how private markets perform differently from public markets during the same time period. Note that the indices contain several differences in the way that they are calculated, including the following, and therefore may not represent a fully accurate representation of the private/public credit market. The CDLI is an asset-weighted index based off of quarterly SEC filings required of BDCs, whose primary asset holdings are U.S. middle market corporate loans. SEC filing and transparency requirements eliminate common biases of survivorship and self-selection. The index returns are generally published 75 days after calendar quarter-end. The public indices are rebalanced regularly, typically monthly. The public indices are market-value weighted. Cliffwater's index is based off of SEC filings with transparency requirements. The CDLI is calculated using financial statements and other filings for the eligible BDCs (so the index's figures are based on the BDCs' underlying holdings), thus making it unlevered and gross of fees. BDCs whose filings are the source of the CDLI are regulated by the SEC under the Investment Company Act of 1940.
The Bloomberg U.S. Aggregate Bond Index is representative of the U.S. investment grade taxable bond market.
The Bloomberg US Corporate High Yield Index measures the USD-denominated, high yield, fixed-rate corporate bond market.
The S&P/LSTA Leveraged Loan Index is designed to reflect the performance the U.S. leveraged loan market.
The Burgiss Private Equity Manager Universe (BMU), contains 5,341 private equity funds (vintages 1978-2022) as of October 2022 with 30/22 performance data (most recent performance data available). All vintages were included. All private equity sub-strategies in the BMU were included e.g., Equity Generalist, Equity Venture Capital Generalist, Equity Venture Capital Late Stage, Equity Expansion Capital, Equity Buyout, Equity Venture Capital Early Stage and Unknown as well as Equity Unknown. The BMU reflects quarterly time-weighted returns. The BMU is sourced from quarterly unaudited and annual audited financial statements that private investment fund managers produce for their fund investors. Therefore, there may be survivorship bias given that fund managers have discretion to report, or to discontinue reporting for various reasons (e.g. due to liquidation) and therefore may reflect a bias towards funds with track records of success. To protect the confidentiality of individual funds and their underlying portfolio investments, the published benchmark statistics reports contain only aggregate information. Therefore, the BMU is not transparent and cannot be independently verified given that it does not identify the funds included by name. Private investments in the BMU are typically illiquid. Additionally, any updates to historical data to this data universe, which can include adding a fund and its performance history to the database ("backfills") and/or updating past information for an existing fund due to late-arriving, updated, or refined information, would be reflected when that group is published for the next performance. The Burgiss Private I Universe Analytics tool recalculates the data each time a new fund is added, therefore the historical performance of the data is not fixed, cannot be replicated, and will differ over time from the data presented in this communication.
The S&P 500 Index is composed of 500 large-capitalization exchange-traded U.S. companies.
The MSCI World Index captures large and mid cap representation across 23 Developed Markets (DM) countries. With 1,540 constituents, the index covers approximately 85% of the free float adjusted market capitalization in each country.
This document is marketing material: Before investing please read the Prospectus and the PRIIPs KID available on www.blackrock.com/it, which contain a summary of investors’ rights.
Risk Warnings
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time.
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