From Morningstar: 2025-03-25 12:52:00

Long-Term Asset Funds (LTAFs) were introduced in November 2021 as FCA-regulated fund structures offering access to illiquid assets like private equity and venture capital. They cater to a wide investor base, with a focus on defined contribution pension schemes initially.

LTAFs are hybrid funds blending open-ended and closed-ended characteristics. Retail investor access is currently limited due to platform availability. Investment trusts already offer access to alternative assets with ample liquidity, presenting a challenge to the new fund structure’s impact.

LTAFs must invest at least 50% in unlisted securities and can target various asset classes. Managed by alternative investment fund managers, they have monthly redemptions with a 90-day notice period. While they provide variable subscriptions, retail access is primarily through pension schemes.

LTAFs aim to encourage investment in less-liquid assets, driven by regulatory changes to facilitate investor access. Recent developments have broadened access to advised and direct retail investors, self-select pension investors, and non-advised policyholders.

Retail access to LTAFs is currently limited by platforms’ readiness to onboard the new fund structure. The transition from existing EU regulations to the UK’s Consumer Composite Investments rules poses operational challenges, potentially delaying LTAF availability.

Upcoming regulatory changes could accelerate LTAF adoption, such as inclusion in innovative finance ISAs and standard investment categories for self-invested pension products. Investment trusts offer an alternative to LTAFs, providing long-standing access to unlisted assets for retail investors.

The future of LTAFs lies in the convergence of public and private markets, offering investors exposure to unlisted assets. Understanding costs, liquidity, transparency, deal access, and valuation is crucial when considering investments in unlisted assets. LTAFs may take time to establish themselves for direct retail investors, while investment trusts remain a viable option with track records and liquidity advantages.



Read more at Morningstar: Private Market Investing: What is a Long-Term Asset…