By Raluca Jochmann – Allianz Global Investors: The ELTIF, or European Long-term Investment Fund, is currently the topic of the day. The European Union launched the ELTIF back in 2015 with the aim of giving private investors access to illiquid private market investments. However, while the take-up of this investment vehicle has been rather slow, the latest amendments to the law, dubbed ELTIF 2.0., introduced several simplifications as of January 2024. This is expected to lead to an increase in product supply. Scope estimates the ELTIF volume to reach between EUR 30bn and EUR 35bn by the end of 2026, with at least 20 new ELTIFS on the market within the next year.¹

Let’s look at infrastructure investments as a megatrend. In many parts of Europe, large parts of the existing infrastructure are several decades old, the limitations of which we experience on a daily basis. According to a study by the Global Infrastructure Investor Association, only 38% of people worldwide were satisfied with their infrastructure in 2023.² Whether in rail transport, on the road or in places with poor mobile network reception, large-scale infrastructure investments are badly needed not only in Europe, but also worldwide. According to the infrastructure monitor of GI Hub, global demand for infrastructure investment is estimated at USD 94 trillion by 2040.³

Whether in rail transport, on the road or in places with poor mobile network reception, large-scale infrastructure investments are badly needed not only in Europe, but also worldwide.

The development of new infrastructure is a key factor for the future functioning of society, both in economic and social terms. The focus of investment needs is on managing the energy transition, digitalization and demographic developments. Former President of the European Central Bank Draghi pointed out in a report for the European Commission that Europe needs additional spending of around EUR 800 million a year to remain competitive, socially stable, and to meet climate targets. The range of projects that need to be tackled includes the expansion of broadband networks, modernization of local public transport and upscaling of electricity grids for renewable energy. However, state budgets are under pressure. Private capital, including that raised by ELTIF funds, can play a decisive role in funding these important projects. Expertise and market access are required to navigate the complexity of investing in unlisted, or private, infrastructure, which is why this asset class was previously available mainly to institutional investors and very wealthy individuals. The new ELTIF 2.0 regulation opens this investment universe to a broader group of investors. Now, one can invest in an ELTIF starting at smaller amounts of money and make a long-term investment in private markets, which can be a valuable addition to a portfolio invested in liquid equities or bonds.

The development of new infrastructure is a key factor for the future functioning of society, both in economic and social terms. The focus of investment needs is on managing the energy transition, digitalization and demographic developments.

What are the benefits of unlisted infrastructure from an investor’s point of view? Infrastructure has successfully weathered some challenging macroeconomic times in recent years, from the pandemic to the energy crisis and rising inflation.⁴ Critical infrastructure in particular – such as utilities, water supply, mass transportation, telecommunications networks to name just a few – provide essential services to the public and can usually generate relatively stable returns due to their strong market position (with high barriers to entry in asset-heavy, highly regulated low-competition markets) and potential for regulated or long-term contractually secured revenues. Also, often-times infrastructure revenues are directly or indirectly linked to inflation, providing a useful portfolio protection against rising prices. These features make infrastructure an attractive potential addition and diversifier to an investor’s portfolio.

Critical infrastructure in particular – such as utilities, water supply, mass transportation, telecommunications networks to name just a few – provide essential services to the public and can usually generate relatively stable returns due to their strong market position and potential for regulated or long-term contractually secured revenues.

However, while return opportunities are attractive, one is well advised to also consider the specific characteristics and risks associated with private market investments. The illiquid nature of these investments means one should treat them as a long- term investment, not one that provides short-term liquidity. In addition to illiquidity, private markets carry specific other risks, which investors need to understand – by relying on appropriate advice and information – and properly consider in the light of their own portfolio objectives.

By investing in an ELTIF as a long-term addition and diversification to an otherwise liquid portfolio, private investors can make a threefold contribution – to a modern infrastructure, a sustainable society and their own wealth creation.

Find out more about Allianz Global Investors Infrastructure ELTIF by scanning the QR code.

1. https://www.scopeexplorer.com/files/get/?name=news.ReportFile/bytes/filename/mimetype/Scope_ELTIF_study_2024_final.pdf ↩︎
2. https://giia.net/news/new-infrastructure-attitudes-study-flags-urgent-need-investment ↩︎
3. https://www.gihub.org/infrastructure-monitor/ ↩︎
4. https://www.gihub.org/infrastructure-monitor/ (Page 10) ↩︎