On 21 December 2023, the Swiss Federal Council and HM Treasury in the UK announced the signing of an agreement on mutual recognition in specific areas of financial services between Switzerland and the UK referred to as the Berne Financial Services Agreement (the Agreement). The conclusion of this ground-breaking Agreement is the culmination of more than two years of negotiations following the signing of a Joint Statement on 30 June 2020 aiming at enhancing cooperation in financial services between Switzerland and the UK. 

Background Both focus on investing in long-term and illiquid assets in areas such as venture capital, private equity, private debt, real estate and infrastructure. These long-term assets are not typically traded on public markets and so are not subject to continual daily opportunities to buy and sell them. Investment usually requires a long-term commitment. These types of funds need to be authorised by their regulator and are subject to investment restriction rules set out in their respective regulatory framework. Reasons for Change ELTIFs failed to meet their original intended success due to restrictive features and not having the same international brand recognition as UCITS. However, they are starting to become more popular within the EEA. This is in part due to the reforms of the ELTIF regulation (as discussed further below) which is intended to increase flexibility. Another factor in increased interest in these funds is because the reforms make it easier for retail investors to invest in ELTIFs by removing some barriers to entry. As private funds managers are increasingly looking to access retail capital, especially high net worth investors, we can expect to see more of these funds. The table below shows a breakdown of where ELTIFs are currently dom­i­ciled:me­di­um In the UK market we can see a similar trend. In July 2023, the Government laid legislation to repeal the European Long-Term Investment Fund (ELTIF) Regulation, which will come into force from 1 January 2024. This will not be replaced, because no ELTIFs have been established in the UK, and the new UK LTAF regime and recent FCA reforms enabling wider distribution provide an alternative fund structure better suited to the needs of the UK market. Since the launch of the first LTAF earlier this year, there has been an uptick in interest for the LTAF and this may grow with the FCAs recent amendments to the distribution of LTAF units. Key Features Comparison Below we set out some comparisons of the key features of these funds. It should be noted that most of the ELTIF features described below will only start applying as from 10 January 2024 which is the date of application of the new Regulation (EU) 2023/606 (ELTIF Amending Reg­u­la­tion)1ht­tps://eur-lex. europa. eu/legal-content/EN/TXT/PDF/?uri=CELEX:32023R0606&qid=1680537336258&from=enfootnotehttps://eur-lex. europa. eu/legal-content/EN/TXT/PDF/?uri=CELEX:32023R0606&qid=1680537336258&from=en, which amends the current ELTIF framework. This briefing does not relate to the tax treatment of ELTIFs or LTAFs.