The Long Term Asset Fund (LTAF) is an FCA authorized open-ended fund in the UK, specifically designed to invest efficiently in long-term, illiquid assets. This enables certain types of professional investors and specified retail investors, to access less liquid asset classes including private equity, private debt, venture capital, real estate and infrastructure, through a special vehicle operating under a robust governance framework.
“Firms will benefit from the ability to reach a broader target market, simultaneously meeting consumer needs, whilst diversifying their investor base, increasing the probability of a successful launch, and consequently holding a more diversified range of assets within the fund.”
– FCA, CP22/14
- Asset managers with experience of managing illiquid, long-term assets.
- Potential investors in long-term asset funds (E.G DC pension providers and trustees)
- Investment advisers, private wealth managers and family offices
- Insurers who write unit-linked long-term insurance contracts
Post-Brexit, the UK’s LTAF was introduced to mirror the European Long Term Investment Fund (ELTIF) and attract highly regulated institutional investors such as pensions for longer-term, illiquid assets such as real estate and infrastructure. Currently LTAFs offer a lot of opportunities to European investors and asset managers, as the UK sits as a financial center off the coast of Europe, making it a more attractive fund regime with additional benefits.
LTAFs are gaining further popularity as a type of authorized fund vehicle that can broaden retail investors’ ability to invest in private equity, private debt, property and other types of long-term assets. These types of assets, as part of a diversified investment strategy, can bring improved risk return dynamics to a portfolio. Reasons for this include:
A tax transparent ACS structure for the LTAF could be attractive, given this should enable tax exempt investors such as registered pension schemes to preserve their tax exemptions and access to relevant double tax treaties.
An LTAF can invest as a feeder fund into a qualifying master LTAF – the master fund itself doesn’t need to be an LTAF, nor even a UK-domiciled fund. The master fund could, therefore, be an existing fund and - subject to ensuring the feeder fund can operate as an LTAF and that there are no local limitations on the master fund having an LTAF feeder - this is a particularly attractive option for many managers who wish to gain access to the UK DC market using their existing fund range.
Given, private assets are typically owned by a smaller group, private asset investors can more actively influence a portfolio asset not only to be more operationally efficient, but positively aligned to environmental and social (ESG) goals.
LTAFs must be classified as an alternative investment fund (AIF) and managed by a full-scope UK alternative investment fund manager (AIFM). Such firms will also need to appoint at least two independent directors.
The LTAF must be open-ended and take the form of either an authorized unit trust (AUT), authorized contractual scheme (ACS) or investment company with variable capital (ICVC).
Must be to invest mainly in long-term illiquid assets. FCA guidance states that the FCA expects LTAFs to invest at least 50% of the value of the scheme property in unlisted securities and other long-term assets such as immovables or other funds that invest in those assets.
The FCA expects managers of LTAFs to explain how their performance fees work, so that investors can assess the merits of investing in the fund. Due to the FCA’s desire for high levels of transparency, managers must make quarterly reports to investors, and within 20 days of the end of the quarter.
Must be no more frequent than once a month; mandatory notice period of 90 days for redemptions to come into effect.
Tax is always an important fund structuring consideration, particularly for illiquid asset funds. The FCA notes that the LTAF rules permit them to be established as property authorized investment funds (PAIFs), and that an LTAF could be structured as an authorized contractual scheme (ACS).
The LTAF's authorized fund manager (AFM) will be required to undertake an annual value assessment, in common with other FCA regulated funds. The AFM will be required to assess and demonstrate that the LTAF offers value to its investors relative to the fees charged.
Marketing of the LTAF to retail investors would need to satisfy certain conditions. Currently the LTAF may only be marketed to certain limited categories of retail investors.
Our team is well-versed in managing such transitions for different fund structures and will work closely with you to navigate every step of the handover. From comprehensive and fast onboarding to data migration, we will guide you through all these stages with no reduction in service level and minimum disruptions to investors and fund managers.
Launching a new fund requires expertise, planning and coordination between all parties. You can count on Trustmoore to guide and support you through the various steps of this process from the outset. Our fund-industry experts provide you with the setup guidance and assistance you need. As a fund administration provider, Trustmoore is familiar with the legal and tax-service landscape of various jurisdictions. We can introduce you to essential parties or even provide a turn-key solution to reduce fund setup time.
LTAFs require more extensive annual assessments than that required for other UK regulated funds. Trustmoore can work within the parameters of the FCA’s authorized fund regime to deliver assessments as well as other reporting obligations.
Allow us to assume your complete administrative and regulatory burden by providing local management, administrative, corporate secretarial and accounting services in the most key financial hubs worldwide. Our platform solution services your entire global fund structure, including any special-purpose vehicles (SPVs) and keeping them in good standing.
Trustmoore can source and support in the appointment of an experienced UK based third-party AIFM.
Focus on your investment fund while Trustmoore ensures that your investors enjoy the attention and services they require and deserve. Our transfer-agency and investor-relations specialists are highly experienced in providing investors with relevant and requisite information and services.
Trustmoore has access to a large network of depositary partners who can accommodate the specific demands that the LTAF rules place on the AFM and service providers. All our partners have extensive knowledge and experience to act as depositaries for alternative-investment funds and UCITS.
Given the complexity of an LTAF, Trustmoore can act as an extension of an AFMs operations, helping to provide services such as investor onboarding and KYC, regulatory compliance and even ESG reporting tools. Outsourcing fund administration services to Trustmoore can lead to savings on fund expenses and enhanced operational efficiency for your fund.
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