The FCA has approved the first Long Term Asset Fund (LTAF) with Schroders becoming the inaugural provider.
The LTAF is a new category of open-ended, authorised fund designed to invest in relatively illiquid long-term assets.
The open-ended investment funds will help support investment in assets like infrastructure, real estate and private equity.
In October 2021 the FCA confirmed it would go ahead with plans for long-term investment funds.
The funds will be aimed initially at sophisticated investors and pension funds but could potentially be opened up later to other retail investors.
The new funds, announced in principle in 2020, will be called Long Term Asset Funds (LTAFs) and will aim to encourage more investors to invest over the long term. The funds will come with a mandatory notice period of 90 days.
Schroders confirmed today it had received approval from the UK’s Financial Conduct Authority to launch the first Long-Term Asset Fund (LTAF).
Schroders Capital – the private assets division of Schroders – will focus on providing defined contribution (DC) and other eligible investors with the opportunity to access the firm’s private asset investment offering. Schroders said LTAFs may also have a role to play in the UK wealth market, subject to the outcome of FCA consultation on broadening access to the funds.
Peter Harrison, group chief executive, Schroders, said: “We feel strongly that a wider range of UK savers must be able to take advantage of the robust returns and diversification benefits that investing in private assets can bring. There are some great industries and firms which could be further supported by long term capital.
“The LTAF structure is designed to address this and I am delighted that the imminent launch of Schroders’ first LTAF, which is the first to be approved in the UK, will enable these companies to start benefiting from big pools of long-term capital and, in turn, help long term savers.”
The government and FCA want to encourage more investment in longer term assets to support the growth of the economy and investment in long term projects.
The FCA’s new LTAF regulatory regime came into force in 2021 but it has taken some time to get the first fund off the ground.
Sarah Pritchard, FCA executive director of Supervision, Policy and Competition – Markets said: “We made these rules to create an environment where investors that wish to invest in productive finance assets can more easily do so.
“It was for market participants to make this a reality and it is good to see this product innovation now taking place.”
The FCA has worked with the Bank of England, the Treasury and industry, through the Productive Finance Working Group to help boost investment in longer-term, less liquid assets offered to investors who understand the risks.
The FCA added: “The ability to invest in illiquid assets, through appropriately designed and managed investment vehicles is important for supporting economic growth and the transition to a low carbon economy.”
The FCA is currently inviting views on ideas about how to further improve asset management regulation.
