Deep Dive: Investors recognise LTAF potential but structure has yet to build market credibility

Opportunities and risks

The potential to provide higher risk-adjusted returns and a wider pool of investment opportunities has driven some asset managers to embrace the Long-Term Asset Fund, but the structure has yet to build its market credibility.

With demand for alternatives and uncorrelated assets increasing in recent years, the Financial Conduct Authority has responded by offering a vehicle to access this area of the market — the LTAF.  Available since November 2021, the LTAF is an open-ended authorised fund structure that can invest in a full range of illiquid asset classes. This new fund structure is the UK's response to the EU's European Long-Term Investment fund (ELTIF). Demand for the product has been very limited to date, however. LTAFs were originally restricted to professional investors, such as DC schemes, but reduc...