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ELTIFs are regarded as forward-looking investment vehicles for long-term investments. Numerous new funds are driving the growth of an asset class that offers opportunities for both banks and clients. Nevertheless, many banks remain hesitant to enter the market due to perceived operational complexity. Michael Patzelt, Head of Sales DACH at Moventum, explains why now is the right time to take a closer look.

European Long-Term Investment Funds (ELTIFs) are regulated funds that channel capital specifically into long-term, often illiquid assets such as infrastructure, renewable energy, or private markets. They therefore open up asset classes that have largely been inaccessible to retail investors to date. “Particularly in the current environment of low real yields and high valuations, ELTIFs offer attractive diversification and return opportunities – within a clearly defined regulatory framework,” explains Patzelt.

Despite these opportunities, only a limited number of custodian banks have so far ventured into the processing and safekeeping of ELTIFs. The main reason lies less in the product itself and more in the technical infrastructure: holding periods and redemption notice periods cannot be mapped in many core banking systems, or only with considerable additional effort. “Alternative investment funds have never been a mass-market product in traditional custodian banking,” says Patzelt. Accordingly, many systems have historically been designed for liquid standard funds. Adapting these systems to properly integrate ELTIF-specific timelines and processes requires time – and, above all, investment.

This raises the question of economic viability for many institutions: system upgrades typically only pay off if capital inflows into ELTIF business are expected to reach several hundred million euros within a medium-term timeframe. “As long as these volumes cannot yet be reliably forecast, the willingness to make significant upfront investments remains limited,” says Patzelt.

As a result, ELTIFs have not yet gained broad market penetration. Some banks remain in a holding pattern – with the risk of missing out on a potentially significant market boom. Institutions that miss the opportunity to engage with ELTIFs may find themselves permanently disconnected from competition in the long-term private markets investment space.

Moventum offers an alternative, as ELTIF purchases are possible within the company’s proprietary system. This allows banks to offer ELTIFs without making their own system adjustments and to position themselves early in the growth market for long-term investments. “This enables regulatory complex products to be efficiently integrated into the product offering while unlocking new revenue potential in the retail client business,” says Patzelt.