What is a long-term asset fund (LTAF)?
Long-Term Asset Funds (LTAFs) are opening up new investment opportunities beyond the stock market. This is what investors need to know.
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*Schroders is delighted to partner with Hargreaves Lansdown, the UK’s number one investment and savings platform, to offer the UK’s first Long-Term Asset Funds (LTAFs) tailored for experienced private investors.*
The Long-Term Asset Fund, or LTAF, is a relatively new concept in the UK investment landscape. But, while the fund type is fresh on the scene, there has long been a need for something like this – a way for more people to invest more directly into assets that have historically been hard to access, such as private equity or infrastructure.
Supported by the UK government and investment industry, the LTAF is designed to help individual investors as well as the wider economy by channelling money into long-term projects.
LTAF in a nutshell
LTAFs allow individual investors to directly access a wider range of investments, including “private market” assets, in the process providing capital to support important sectors like renewable energy, broader UK infrastructure, and innovative start-up companies.
In the UK, individual investors have previously been able to use investment trusts to gain indirect exposure to these asset classes, by investing in the shares of listed funds that in turn own closed portfolios of private market assets. We believe investment trusts continue to represent an excellent vehicle for retail investors with low tolerance to illiquidity.
However, ongoing growth, innovation, and development in the private market industry is changing things and providing UK private investors with greater choice as to how they gain exposure to private markets.
The FCA launched the LTAF regulatory regime in 2021, initially to enable pension schemes to put their capital to work supporting the UK’s long-term economic growth and the transition to a low carbon economy. New developments, in 2023, mean individual investors are now also able to invest in LTAFs.
Widening the LTAF scope means more options in the UK-authorised funds ecosystem, providing another access point to private markets for investors. LTAFs are complementary to existing private asset structures – like investment trusts – offering new flexibility in how UK investors will be able to meet their objectives via private market investments.
What are “private market” investments?
You may be familiar with “public” investments, such as shares in companies traded on the stock market, which can be bought and sold at any time. In contrast, “private market” investments are not available on public markets and they change owners much less frequently. Over the past 15 years, private markets have broadened significantly. Beyond private equity and real estate, areas like renewable infrastructure projects (such as wind farms), as well as venture capital supporting up-and-coming businesses in areas like financial technology, life sciences, and artificial intelligence have seen substantial growth.
Adding private market assets to a portfolio can improve its risk and return profile for three main reasons:
- Wider opportunities: Private markets give access to many businesses and projects not found on the stock market, opening up a broader range of potential investments.
- Potential for stronger returns: Historically, private assets have delivered better long-term performance than public markets, although past results are not a guarantee of future returns.
- Active ownership: With fewer investors involved, private assets allow owners to be more directly engaged with the business, supporting improvements and encouraging positive environmental and social outcomes.
It’s important to know that with private markets investments, it can take longer to access your money compared to public markets. Private assets are also more complex than traditional shares or bonds and may be valued less frequently.
How does an LTAF work?
An LTAF is what’s known as an “open-ended” fund. This means it can grow by accepting new investments and issuing new “units” (think of these as shares of the fund). You can also request to withdraw your money, following set rules.
Unlike traditional funds you might be used to, you cannot buy or sell your units in an LTAF every day. Instead, you can usually invest or withdraw money at set intervals, like once a month or every quarter. This is because some of the fund’s assets are harder to sell quickly, and the fund needs to balance ready access with the long-term nature of what it owns. The frequency of buying and selling is set by the types of investments the fund holds. Fund managers also keep a portion of the fund in cash or easier-to-sell investments to help cover withdrawals.
There are also rules about how often the assets are valued, so investors have a reliable update on what their units are worth.
What are the benefits of LTAFs for retail investors?
- Access to new opportunities: LTAFs make it possible for individual investors to back companies and projects that aren’t listed on the stock market, including growing businesses and large-scale infrastructure.
- Potential for higher returns and more diversification: By adding private assets to your investment mix, you could benefit from a wider range of returns and reduce exposure to the ups and downs of the stock market. Some assets, like renewable energy infrastructure, can behave differently from shares and help balance your portfolio.
- Tax efficiency: LTAFs can be included within certain tax-efficient accounts, such as Self-Invested Personal Pensions (SIPPs) and Innovative Finance ISAs. From April 2026, they’ll also be available in Stocks & Shares ISAs.
- Lower minimum investment amounts: These funds generally have lower minimum investments compared to traditional private market funds, making them more accessible to individual investors.
What are the risks?
- Risk to capital: Like all investments, the value of your money can go up or down, and you might not get back what you originally invested.
- Liquidity risk: Investments in private markets are not as easily or quickly bought and sold as shares in listed companies. With an LTAF, you can only invest or withdraw money at specific times, and you will need to give notice – at least 90 days or more.
- Redemption caps: If lots of investors want their money back at once, the fund can limit withdrawals for a period to protect everyone.
Is an LTAF right for you?
LTAFs are designed for investors who can commit their money for longer periods and are looking to diversify outside the stock market. If you need quick access to your cash, these funds may not be the right choice. They require a willingness to accept that your money is tied up and to understand the potential extra risks and complexities of private investments.
If you’re looking for new ways to spread your investments and access private markets—once only open to large institutions—LTAFs can be a valuable addition to your investment plan.
This content is for informational purposes only and should not be considered as financial, legal, or investment advice.
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