FCA To Allow Consumer Access to LTAFs for Wider Fund Choice

The Financial Conduct Authority has today released details that it is to widen to Long Term Asset Funds (LTAFs) to retail investors and pension schemes.

What is an LTAF?

An LTAF is an open-ended fund meaning it can expand and issue more units where the value of your unit is based upon the actual value of investments held by the fund.  This differs to a closed fund where no new units can be issued such as an investment trust where the market value is based upon demand for that unit or ‘share’ rather than the value of the assets held in the fund.

An LTAF invests in long term, illiquid assets that take longer to reach their true potential such as private equity, venture capital, private debt, property, infrastructure and more recently ‘green’ investment and infrastructure projects that may take many years to come on stream and in profit.

LTAF Risks

By their very nature, more speculative projects and long-term investment return objectives, LTAFs are deemed by the FCA as higher risk and will sit in the FCAs High Risk investment framework.  It is unlikely that many financial advisers will recommend LTAFs to all clients but may be so to experienced investors only that have the capacity for loss as well as the ability to invest longer term to achieve long term goals.

Investor Protection

The FCA is exploring whether it is feasible to include these funds within the remit of the Financial Services Compensation Scheme (FSCS).

Comment

You may also know this approach as 'Patient Investing'.  It is rght that the government, the FCA and the Bank of England have established a Productive Finance Working Group to use the behemoth that is the UK Financial services industty to push the UK ahead of competitor nations is new industries such as artificial intelligence, climate control and green energy, home energy efficiency as well as battery and microchip production (there is a lot of Lithium in Cornwall).