The Financial Conduct Authority has confirmed that it will be taking forward proposals to create a new type of fund designed to invest efficiently in long term assets. The new rules create a Long-Term Asset Fund regime that is designed to help support investment in assets including venture capital, private equity, private debt, real estate and infrastructure. 

Sophisticated investors and pension funds are among those who will have access to new types of investment opportunities following changes made by the FCA. Currently, some investors are unable, or unwilling, to invest in long-term assets. “If this innovative fund structure, created by our rules, is taken up by the asset management industry, it may provide alternative routes to returns for investors, while supporting economic growth and the transition to a low carbon economy,” says chief executive of the FCA, Nikhil Rathi.

The FCA’s rules embed longer redemption periods, high levels of disclosure, and strong liquidity management and governance features which they hope will provide sufficient investor protection and enable defined contribution pension scheme investment into the LTAF.

The LTAF regime was committed to by the Chancellor in his statement to Parliament on the Financial Services bill last year and is also part of the recommendations of the Productive Finance Working Group’s roadmap, published last month.

The FCA will be consulting next year on the potential for widening the distribution of the LTAF to certain retail investors.

“While this would potentially open a controlled route for retail investors to higher risk assets than some of the other routes currently available such as unauthorised funds, safeguards would also be needed to ensure retail investors understand the risks involved,” Rathi says. “Next year’s consultation will set out proposals for how this could be achieved.”

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