Practice chapter · context
By Niko Hatziiosifidis · last reviewed 23 Aug 2026
Criticism of ELTIFs is not a fringe view: the Verbraucherzentrale (German consumer advice centre), BaFin president Branson, Morningstar and academic voices such as Ludovic Phalippou and Cliff Asness name real weak points — high costs, restricted liquidity, smoothed valuations, demanding distribution. The fact check, however, shows a more nuanced picture: some objections go to the heart of the matter (costs, quality of advice), others are more sweeping than the data supports (the leftovers charge, the comparison with German open-ended property funds). If you take the criticism seriously without adopting it unchecked, you can separate the wheat from the chaff — which is exactly what this chapter is for.
The criticism: The Verbraucherzentrale (“ELTIFs: Neue Anlageform mit Tücken”, as at October 2025) warns of entry charges of up to 5% plus ongoing costs plus performance fees, and cites as an example an ELTIF with 2.8% ongoing costs plus a 1.71% performance fee. Hartmut Walz’s blog states that private equity ELTIFs cost “about ten times as much as equity ETFs”. Finanztip, too, rates the ELTIFs distributed via neobrokers as too expensive. BaFin president Mark Branson followed up in May 2026: three to four per cent a year is normal, five to six occurs.
The evidence: Morningstar puts the average ongoing costs of semi-liquid funds in 2026 at around 3%. Our own database (as at August 2026) shows a median of 2.34% ongoing costs for ELTIFs (n = 92 of 141 funds with a cost figure) — well above ETF level, but with considerable dispersion: there are funds below 1.5% and funds above 4%, often with a performance fee on top.
Our reading: The objection holds — costs are the best-documented drawback, and they are certain while the return is not. What the blanket criticism leaves out: the range is wide, and the ETF comparison is flawed in so far as ELTIFs represent a different asset class with real administrative work behind it. The fair question is not “more expensive than an ETF?” but: after costs, is there a premium left over liquid alternatives? That is precisely what the empirical evidence casts doubt on (see objection 4).
The criticism: On Hartmut Walz’s blog, consumer advocate Stephanie Heise (Verbraucherzentrale NRW) sets out the thesis that there is “a danger that institutional investors cherry-pick the projects with an attractive risk/reward profile, so that the less advantageous ones are left over” — possible adverse selection, modest returns with elevated risk.
The evidence: Structurally, there is much against the hard version of the thesis: most ELTIFs do not buy “left-over” individual deals but build on secondaries and co-investments from the same platforms that serve institutional clients — retail investors then sit in the same target funds and transactions. For the soft version, though, there are indications worth taking seriously: evergreen vehicles have to call and deploy capital continuously, which creates pressure to buy in weaker market phases too; and a manager able to keep the best capacity scarce has little reason to steer it preferentially into the vehicle with the highest distribution costs. Moonfare’s halt to distribution of its PE ELTIF (August 2025) also shows that even specialist providers do not automatically make the retail business viable.
Our reading: “The bargain bin” is not supported as a blanket verdict — as a prompt to check, it is entirely legitimate. Whether a particular fund invests pari passu with the institutional vehicles or is filled from the second row is not something the marketing tells you; it is in the allocation policy and the portfolio data (see the professional deep dive).
The criticism: The Handelsblatt commented in April 2025 (Markus Hinterberger): “ELTIFs face the same fate as open-ended property funds” — products nobody asks for are actively sold, and “history can repeat itself, in financial distribution too”. The reference is drastic: in 2008/09 German open-ended property funds froze; 18 funds with around €26 billion were wound up, with outcomes between −54.8% and +0.8%; the KanAm Leading Cities Invest has been in wind-down since June 2026.
The evidence: The structural difference lies in the mechanics: open-ended property funds of the old design promised daily redemption on illiquid assets. ELTIFs build in friction — in our database 93 of 141 funds have quarterly redemption dates, the gate is usually 5% per redemption date (69 of 141), and on top of that come minimum holding periods and notice periods. The first stress tests came in 2025: Greenman OPEN suspended redemptions in December 2025, Altaroc Horizon 2024 went into wind-down. At the US counterpart BREIT, proration ran for 15 months — the mechanics held, investors got out late but in an orderly fashion.
Our reading: The commentary touches a sore point: anyone who reads “quarterly redemption” and understands “available at any time” is falling for an illusion — BaFin rightly criticises the fact that risk indicators barely capture this. What is wrong, though, is the equation: gates and notice periods are precisely the lesson of 2008. They do not stop investors having to wait — they stop the quickest getting out at the expense of the slowest.
The criticism: Ludovic Phalippou (Oxford) showed in 2020 that since 2006 private equity funds have on average delivered no more than equity market level — while around US$230 billion in carry flowed to the managers. Harris/Jenkinson/Kaplan (2016) had still measured +3–4% p.a. against the equity market for funds from before 2006. Morningstar’s verdict on semi-liquid funds in 2026: only 4 of 19 rated funds received a Medalist rating of Bronze or Silver, and after costs few are likely to beat their benchmark indices.
The evidence: The figures are robust and sobering — all the more so because ELTIF cost structures sit above those of the institutional vehicles on which the academic return studies are based. The counter-position: averages conceal an enormous dispersion between managers; top-quartile funds historically delivered clear excess returns, and access to such managers is the real selling point of many ELTIFs.
Our reading: “The marketing promises too much” holds: anyone advertising 12–15% while the average empirical evidence points to market level minus the extra costs owes an explanation. At the same time, “it delivers nothing” is as unproven as “it certainly delivers more” — the dispersion makes manager selection the central variable, and one that retail investors can hardly check.
The criticism: Cliff Asness (AQR) coined the term “Volatility Laundering” for this: because private markets valuations rest on appraisals rather than market prices, the curves look smooth — the risk has not gone away, it is simply not shown. Investors, on this view, ultimately pay for not having to see their losses. BaFin, too, objects that ELTIF risk indicators therefore often sit only in mid-range. A fund selector profiled by Citywire rejects semi-liquid structures on principle for similar reasons (“Why one fund selector never believed in semi-liquids”).
The evidence: The mechanism is undisputed and well documented: valuation smoothing lowers reported volatility and correlation without changing the economic risk. An SRI of 3–4 at a fund whose target assets fluctuate like equities describes the calculation method, not the risk. The counter-position: for an investor who really does hold for ten years and never has to trade at a quarterly NAV, the smoothed interim reading is largely irrelevant — and smoothing can prevent the panic selling that costs real return in liquid investments.
Our reading: The criticism holds wherever NAV smoothness is sold as evidence of safety or diversification — that is mislabelling. It does not hold as an argument against the asset class itself, provided the investor knows the true risk and genuinely has the horizon. The test is the honesty of the presentation, not the smoothing as such.
The criticism: FONDS professionell reported in July 2026 that specialist lawyers are warning of liability traps in ELTIF distribution — the requirements, they say, match those for structured real asset investments, not those for conventional funds. Morningstar supplies the matching figure: only 16% of financial advisers describe themselves as “very familiar” with semi-liquid structures. Branson added that what suits wealthy or professional investors does not automatically suit retail clients.
The evidence: The product mechanics — gates, notice periods, proration, valuation methods, ramp-up phases — objectively need explaining; the stress cases of 2025 (Greenman, Altaroc) show that it is precisely these details that decide the investor experience when it matters. At the same time the market is growing faster than advisory competence: 268 registered ELTIFs, €34.0 billion in volume, +54.7% in a year, 113 new funds in 2025 alone (Scope).
Our reading: This point holds almost without qualification — and it is the lever the others hang on: costs, liquidity limits and valuation logic are manageable characteristics when they are understood, and liability traps when they are not. That the industry is launching products faster than it is building knowledge is currently the critics' strongest single argument.
The “leftovers” question cannot be answered in the abstract, but it can be answered rather well fund by fund. Three areas to examine:
1. Where the deals come from. Look in the annual report and the factsheet at what the portfolio actually consists of: primaries (subscriptions to the manager’s own or third-party target funds), secondaries (purchases of existing fund interests, often at a discount) or co-investments (participation alongside a lead investor). Critical questions: who is the lead, and why is it giving the deal away? Do the co-investments come from the manager’s own institutional platform — or are they collected in the market, where the best deals are rarely left over? With secondaries: is the entry discount disclosed as a source of return (legitimate), or does it paper over the quality of the portfolios taken on? A manager with its own large institutional deal flow has structurally less reason for adverse selection than a pure access intermediary.
2. Parallel vehicles. The decisive question is this: does the ELTIF invest pari passu — that is, at the same time, on the same terms, in the same transactions — as the institutional flagship funds of the same house? The answer is in the allocation policy in the prospectus, often in the small print on conflicts of interest. Warning signs: vague wording (“may participate in transactions of the group”), priority for institutional vehicles when capacity is scarce, or an ELTIF that mainly takes over residual holdings from funds that are running off. Positive signs: a binding pro-rata allocation, cornerstone investments by the manager itself or by institutional anchor investors in the same vehicle — anyone putting their own money in alongside on the same terms believes in the selection.
3. Fee comparison with the institutional class. Compare the ELTIF terms with the institutional share class or the flagship fund of the same manager: management fee on NAV or on committed capital? Performance fee with a hurdle rate and high-water mark — or without? Is the fee calculated on gross or net assets? A premium of 50–100 basis points for structuring and distribution can be explained; a doubling of total costs combined with a softer carry mechanism (say: deal-by-deal instead of whole-fund, no hurdle) is a sign that the vehicle is designed primarily as a source of income for the provider. Our database shows that between the cheapest quarter (below approx. 1.8% ongoing costs) and the most expensive (above approx. 3%) there is more difference in return than most manager-selection effects can produce.
If you examine all three areas and find no clear answers, you have your answer: opacity at exactly these points is itself the signal.
That depends on the fund, the costs and your horizon — in the abstract it can be neither affirmed nor denied. The empirical evidence counsels sobriety: on average, private markets funds have delivered roughly equity market level since 2006, and ELTIF costs sit above that. An investment stands up best if you can comfortably bear the illiquidity and have found a fund with below-average costs and deal access you can follow.
High costs (median 2.34% ongoing in our database, around 3% across the market according to Morningstar), severely restricted availability (redemption usually quarterly, with notice periods and gates), smoothed valuations that make the risk look lower, and an advice landscape that is often not yet familiar with the product.
As a blanket verdict this is not supported: many ELTIFs invest via secondaries and co-investments in the same deals as institutional vehicles. As a risk, though, it is real and can be checked fund by fund — through where the deals come from, the allocation policy and the fee comparison with the institutional class.
The market is young: 268 registered ELTIFs with €34.0 billion (Scope, 2026), most of them on the market only since 2024/25. 2025 brought the first stress tests — one redemption suspension (Greenman OPEN), one wind-down (Altaroc Horizon 2024), one discontinued distribution (Moonfare). Long-term return experience over a full cycle does not yet exist for the new generation.
No. The norm is quarterly redemption dates (93 of 141 funds in our database), minimum holding periods, notice periods and gates of usually 5% per redemption date. If redemption pressure is high, payment can be stretched out or suspended — so plan money invested here as tied up for the long term.
The Verbraucherzentrale and BaFin criticise above all the combination of high costs, liquidity mechanics that are hard to understand, and risk indicators that do not fully capture liquidity and valuation risk. That is not a statement that every ELTIF is bad — but that the product needs explaining, and that the explanation often falls short in distribution.
Last reviewed: 23 Aug 2026 · Methodology · Not investment advice.