Investment Group to Introduce Long-Term Alternative Fund
Expanding Horizons for Long-Term Asset Funds (LTAFs): Partners Group Takes the Lead
The financial landscape is evolving, with Long-Term Asset Funds (LTAFs) gaining traction as a means to provide easier retail access to long-term private markets investments. One of the pioneers in this space is Partners Group, which recently received approval from the Financial Conduct Authority (FCA) to launch a private credit-focused LTAF.
This marks the first LTAF for Partners Group, following a successful partnership with BlackRock last September in launching a multi-private markets product. The LTAF authorisation was made effective as of 27 January 2024. BBB and Phoenix have also invested £500m into Schroders' LTAF, demonstrating growing industry interest in these funds.
To truly capture the interest of retail investors, LTAFs need to overcome certain regulatory hurdles. Justin Partington, global head of fund and asset managers at investor services group IQ-EQ, emphasised this point, stating that further regulatory changes are necessary, particularly around access and liquidity.
Partington suggested that the LTAF regime must ensure that fund structures and redemption limits and liquidity pool are aligned with investor expectations to succeed for a wide range of investors. Placing illiquid assets in structures offering frequent withdrawals can lead to problems, he warned.
Regulatory changes to address these concerns are underway. For instance, regulators are proposing to relax or revisit restrictions that currently limit private or long-term funds largely to institutional or accredited investors. This would broaden retail investor opportunities to diversify their portfolios aligning with their risk tolerance and investment horizon.
Moreover, there's ongoing review of liquidity risk frameworks for fund managers, which is critical for making long-term illiquid asset funds like LTAFs more attractive and understandable to retail investors.
In addition, efforts are being made to speed up authorization timelines and reduce regulatory burdens, facilitating easier market entry and possibly lowering costs for funds targeting broader investor bases, including retail.
The regulatory changes needed to appeal to a wider retail market include relaxing investor eligibility restrictions, enhancing transparency and advertising rules, improving liquidity risk management frameworks, and streamlining regulatory authorization processes. These changes collectively support making LTAFs more accessible and understandable for retail investors, who traditionally face barriers entering such funds.
Since Partners Group's LTAF launch, another two dozen LTAFs have either been launched or approved in the UK. Partners Group has also received clearance to provide an umbrella for additional LTAF structures that will be used for bespoke LTAF separately managed accounts (SMAs). This expansion underscores the growing potential of LTAFs in the financial market.
In conclusion, the approval of the Partners Group LTAF shows the ongoing interest in private credit as an asset class. As regulatory changes continue to unfold, we can expect to see more retail investors embracing LTAFs as a viable investment option. However, it is crucial that the LTAF regime remains aligned with investor expectations to prevent trying to fit a square peg into a round hole once again.
References: 1. Financial Times 2. European Commission 3. HM Treasury 4. Investment Week
- The approval of Partners Group's LTAF, following successful partnerships with BlackRock and other investors like BBB and Phoenix, signifies an increasing interest in investing in business and finance through long-term asset funds.
- To attract more retail investors to private markets investments, it's essential that regulatory changes addressing accessibility, liquidity, transparency, and authorization timelines are implemented, as suggest by Justin Partington, global head of fund and asset managers at IQ-EQ.
