Since the long-term asset fund regime was introduced in 2021, several asset managers have launched LTAFs, a category of open-ended authorised funds.
In March, Schroders Capital announced it was intending to launch a UK venture and growth LTAF for institutional investors. This came a month after the launch of its second LTAF, which focuses on renewable energy and energy transition infrastructure.
For many years investment trusts, which are closed-ended, have offered a route for private investors looking for exposure to a range of private asset classes, says Emily Pollock, client director, private asset solutions at Schroders.
“In an open-ended structure, the trade-off for liquidity is that the share price moves independently of the stated underlying investments’ value,” she adds. “Some investors favour the structure for this reason, as it allows for monthly or quarterly liquidity, and offers the potential to buy at a discount.
“LTAFs are a new type of FCA-authorised open-ended fund specifically designed to facilitate investment in long-term, less liquid assets, but for a wider investor base that can include retail investors.
“This is an especially important development for private client business providing discretionary and advisory services to retail investors, who will now have a greater choice when allocating to private markets.”
While investment trusts continue to serve many investors well, Pollock says there are some places in which LTAFs may “excel” in meeting investor needs. “In particular, where an end investor has a long-term time horizon and can therefore take on some degree of illiquidity.
“LTAF launches are also typically lower cost to investors and can be scaled over time, and offer less ‘blind pool risk’ than traditional private funds and investment trusts at launch.”
Another asset manager that has offered its defined contribution members exposure to private markets is Legal & General, which launched a Private Markets Access Fund in July.
The fund is structured as a fund of funds, enabling it to deliver liquidity for daily dealing in normal dealing conditions, with an investment in the Legal & General Private Markets LTAF, exposure to liquid securities, as well as L&G and third-party funds.
“Critical to successfully accessing these types of [alternative] investments and managing liquidity will be having the scale and an experienced fund management team to do so,” adds Jesal Mistry, head of DC investments at Legal & General.
Indeed, the semi-liquid nature of LTAFs is something that Ben Leach, head of private market solutions at WTW, says forms an important part of conversations with clients.
“[An LTAF] is an open-ended fund, so in theory, you subscribe to it like you subscribe to a mutual fund or an OEIC in the listed equity space,” he says. “But it is semi-liquid, and I think that that's really key. So [it is] something we spend a lot of time talking about and stressing upfront.
“That semi-liquidity, in technical terms, means anything from 2.5 per cent to 20 per cent of the overall fund can be made liquid per trading frequency. And you can choose to open the fund as frequently as quarterly, and extend all the way out to only annual liquidity windows.
