Focusing on Funds – The Long-Term Asset Fund (LTAF)

United Kingdom

This Focusing on Funds looks at the new LTAF regime that takes effect today. The LTAF, a new category of UK authorised collective investment scheme, is intended to promote investment by professional investors (including pension funds) and sophisticated investors in long-term, illiquid assets.

Why is this relevant to fund managers?

Any new type of fund will be of interest to UK fund managers; and with the UK government actively promoting investment in long-term assets, the degree of political support backing the LTAF will only add to that interest, not only from fund managers, but scheme promotors and investors too. However, while the development of a new category of authorised fund is to be welcomed, what remains to be seen is whether the authorisation process and the prescription of the FCA’s rules will enable the LTAF to truly compete with existing, established alternatives.


The provision for the LTAF is part of a wider drive from the government and the Bank of England to direct pension investment towards illiquid UK assets to support the country’s recovery after the Covid-19 pandemic. As stated in an open letter from the Prime Minister and the Chancellor to the pensions industry, the government’s strategy is to ignite “an Investment Big Bang, to unlock the hundreds of billions of pounds sitting in UK institutional investors and use it to drive the UK’s recovery”. To further support this strategy, within the Budget 2021 the Chancellor announced a plan to make additional changes to the charge cap - currently 0.75% on the default arrangement of certain employer pension schemes – to encourage trustees of DC pension schemes to consider investing in long-term assets. The structure and nature of the LTAF has therefore been designed to allow investment flows towards assets such as infrastructure, private equity and real estate from investors that have historically been reluctant to invest in long-term assets, despite such assets being in line with their investment horizons. The potential benefits for investors could include higher returns as well as improved risk management due to a wider portfolio diversification.

The FCA consulted on draft rules for the LTAF in May 2021 in its Consultation Paper 21/12 (CP 21/12), and it published the final rules in the its October Policy Statement PS21/14 (PS21/14). These final rules are broadly consistent with the draft rules the FCA consulted on, with the addition of some adjustments made to reflect industry feedback and which are discussed below.

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