The Long Term Asset Fund (LTAF) is a new category of authorised open-ended fund. This consultation sets out proposals for broadening the retail distribution of the LTAF.
Why we are consulting
We are consulting on draft rules to market the Long Term Asset Funds (LTAFs) to a wider group of retail investors and pension schemes.
Why are changing our rules
Some retail investors seek out non traditional investments in a search for diversification or higher returns. The LTAF may enable such diversified investment propositions, managed to appropriately high standards. On the other hand, there is a risk that retail investors may be overly reassured by the fund’s authorised status or not fully understand the illiquid nature and corresponding risk of the underlying assets.
We designed robust governance requirements around the LTAF satisfying appropriate regulatory standards to enable investors who understand the risks of investing in long-term illiquid assets to invest with confidence. Given the regulatory standards that LTAFs must meet, and following consultation feedback, we do not want to impose unnecessary restrictions on where consumers can invest. We want investors to be able to access suitable investments that match their attitude to risk. We are therefore consulting on proposals to allow retail access to the LTAF.
Who this applies to
This consultation will primarily be of interest to:
- consumer groups
- asset managers with experience of managing illiquid, long term assets
- potential investors in long term asset funds, like pension providers and trustees of DC or hybrid pension schemes, and sophisticated or wealthy investors
- investment advisers and private wealth managers
- insurers who write unit linked long-term insurance contracts
- fund distributors
Background to the policy
This consultation sets out proposals for broadening the retail distribution of the LTAF to more categories of retail investors, whilst including further investor protections. We set out proposals to treat the LTAF as a Restricted Mass Market Investment (RMMI), in line with PS22/10 (Strengthening our financial promotion rules for high-risk investments). This will enable a broader range of retail investors to access the LTAF whilst ensuring investors understand the risks involved.
Respond to this consultation
We welcome feedback on our proposals by 10 Oct 2022. Subject to the responses received, we will look to publish a final policy statement and final Handbook rules early in 2023.