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



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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