PS21/14: A new authorised fund regime for investing in long term assets

Read PS21/14 (PDF)

Why we are changing our rules

We have finalised rules for an innovative new category of open-ended authorised funds, the Long Term Asset Fund (LTAF), designed to invest efficiently in long-term, illiquid assets.

Currently, some investors are unable, or unwilling, to invest in long-term assets, even though these assets could meet their investment goals. 

Investment in long-term illiquid assets could yield good long-term outcomes for investors and is important for economic growth and the creation of jobs. The introduction of the LTAF should help facilitate an environment where investors that wish to invest in productive finance assets can do so.  

Our new rules embed longer redemption periods, high levels of disclosure, and strong liquidity management and governance features. This will provide sufficient investor protection and enable defined contribution pension scheme investment into the LTAF. 

Who this applies to 

This consultation will primarily interest: 

• asset managers with experience of managing illiquid, long-term assets 
• depositaries 
• 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      

Background to the policy 

We seek to create an environment where investment in longer-term, less liquid assets by investors who understand the risks, do not need immediate liquidity and have long term investment horizons, can flourish.

Evidence suggests that even some investors with long-term investment horizons are not investing in long-term assets due to barriers, or perceived barriers, to doing so. 

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 published our Consultation Paper on LTAF in May 2021, proposing a flexible regime that aimed 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.

Next steps 

The new Handbook rules and guidance will come into force on 15 November 2021. We plan to consult in H1 2022 on whether to enable a broader range of consumers to invest in LTAFs in a controlled way.