In this Consultation Paper (CP) we are consulting on a regime to enable UK-authorised open-ended funds to invest more efficiently in long-term, illiquid assets.
Why we are consulting
We want investments in long-term, illiquid assets (including productive finance) to be a viable option for appropriate investors with long-term investment horizons who understand the risks.
Investment in productive finance assets has the potential to yield good long-term outcomes for investors. It is also is important for economic growth and the creation of jobs. Without it, some long-term projects with good potential returns may not happen.
But some investors feel there are barriers to this type of investment, related to fund structures as well as to wider issues. We have been working with the Bank of England, the Treasury and industry, through the Productive Finance Working Group to break down some of those barriers. We hope that the creation of the Long-Term Asset Fund (LTAF) will overcome issues related to fund structures and help facilitate an environment where investors that wish to invest in productive finance assets can do so.
We propose a flexible regime that aims to offer an appropriate level of investor protection and to address the specific risks of investing in long-term illiquid assets via an open-ended fund. Initially, we propose to restrict distribution of the LTAF to professional investors and sophisticated retail investors. It is important that this regime commands the confidence of potential investors, so we are seeking your views on whether our proposals do this.
We also want your comments on whether, and how, we could safely permit future wider retail access to these funds than our proposed rules would permit.
Who this applies to
This consultation will primarily interest:
- asset managers with experience of managing illiquid, long-term assets
- potential investors in long-term asset funds, like pension providers and trustees of defined contribution or hybrid pension schemes, and sophisticated or wealthy investors
- investment advisers and private wealth managers
- insurers who write unit-linked insurance business
- fund distributors
We are seeking feedback on this CP by 25 June 2021.