Schroders is the first provider to be been granted FCA approval to launch a long-term asset fund (LTAF) in the UK.
Given the regulatory greenlight in October 2021, LTAFs are regulated open-ended investment vehicles designed to enable a broader range of investors, with longer-term horizons, to invest efficiently in illiquid and private assets.
Going forward, they may also have a role to play in the UK wealth market, subject to the outcome of the ongoing FCA consultation on broadening access to retail investors.
The FCA’s executive director of supervision, policy and competition markets, Sarah Pritchard, 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 watchdog said it has worked with the Bank of England, HM Treasury and industry, through the Productive Finance Working Group to “create an environment where investment in longer-term, less liquid assets, by investors who understand the risks, can flourish”.
“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.”
Good retirement outcomes
Schroders Capital, the firm’s private assets division, will focus on providing defined contribution and other eligible investors with access to less liquid assets.
Peter Harrison (pictured), group CEO of 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.”
Tim Horne, head of UK institutional DC, Schroders, added: “Private assets have the potential to help DC investors achieve their aims of a good outcome in retirement. The LTAF regime has been specifically designed to provide a regulated fund structure that provides a framework to invest into these assets. At Schroders we have been at the forefront of DC investment innovation and we are now focused on launching a private markets solution to best meet the needs of UK retirement savers.”
David Seex, head of private asset solutions at Schroders Capital, said: The LTAF regime is an exciting regulatory initiative that will allow pension savers to invest in private assets and we are focused on leading with our own solution.
“Of course, it is important for investors and their advisors to be clear as to the long-term nature of private investments and when and how they will be able to access their funds. Key considerations should be the liquidity profile of their investment and how this fits with their investment horizon.”