Long Term Asset Funds (LTAF) are now accessible to more defined contribution pension schemes as well as for retail investors because of new regulations established by the FCA
The FCA established the LTAF, a new kind of open-ended authorised fund, in 2021. It was created to let investors effectively purchase long-term, illiquid assets like venture capital, private equity, private debt, real estate, and infrastructure.
According to the FCA, LTAFs are a higher-risk tool that can broaden portfolios, but they come with less immediate liquidity and longer redemption periods in exchange for possibly larger returns.
Under the FCA’s high-risk investment framework, LTAFs will be subject to additional safeguards, such as risk alerts and client evaluations, to assist protect consumers.
The FCA is looking for opinions on whether the Financial Services Compensation Scheme’s protections should apply to this product or whether an alternative strategy should be in place before LTAFs reach the market.
FCA executive director, markets Sarah Pritchard says: “Longer-term less liquid real assets can generate good alternative returns for investors and, crucially, help to grow the UK economy through investments, such as new infrastructure.
“Our new rules allow retail investors, and pension funds, to invest in productive finance, but they also recognise that long-term investments can be riskier. That is why people will be given clear risk warnings and customer assessments, in line with other higher risk products.”