Recital 1

(1)Under Article 9(2), point (d), of Regulation (EU) 2015/760, European long-term investment funds (ELTIFs) are prohibited from using financial derivative instruments, except where the use of such instruments solely serves the purpose of hedging the risks inherent to other investments of the ELTIF. The financial derivative instruments that should be considered to solely serve the purpose of hedging the risks inherent to other investments of the ELTIF are those the underlyings of which correspond to the assets to which an ELTIF has or would have exposures. In some cases, however, there may be no financial derivative instruments available to hedge an exposure to a specific asset. In that case, it should be possible to hedge that exposure by using a financial derivative instrument the underlyings of which belong to the same, or economically similar, asset class as the financial derivative instrument the underlyings of which correspond to the assets to which an ELTIF has or would have exposures. To ensure that the use of financial derivative instruments solely serves the purpose of hedging the risks inherent to other investments of an ELTIF, the financial derivative instruments used should effectively reduce the risk concerned. The reduction of risk should therefore be verifiable through systems that identify the risks to be mitigated and the way in which the financial derivative would mitigate such risk.