Schroders becomes first to launch long term asset fund

Ltafs are open-ended investment vehicles designed to allow a broad range of investors to invest in illiquid and private assets.

They were created in a bid to solve the liquidity mismatch conundrum which has seen open-ended property funds gate for withdrawals multiple times over the past few years due to market volatility.

The issue was also highlighted by the failure of the Woodford Equity Income fund, which was an open-ended fund marketed at retail investors which invested heavily in unlisted companies.

Peter Harrison, chief executive of Schroders, said: "We feel strongly that a wider range of UK savers must be able to take advantage of the robust returns and diversification benefits that investing in private assets can bring. There are some great industries and firms which could be further supported by long term capital.

"The Ltaf structure is designed to address this and I am delighted that the imminent launch of Schroders' first Ltaf, which is the first to be approved in the UK, will enable these companies to start benefiting from big pools of long-term capital and, in turn, help long term savers."

Schroders said it would be using the first Ltaf to launch a private markets product for UK retirement savers.

Private assets have the potential to help DC investors achieve their aims of a good outcome in retirementTim Horne, head of UK institutional DC at Schroders

Tim Horne, head of UK institutional DC at Schroders, said: "Private assets have the potential to help DC investors achieve their aims of a good outcome in retirement. The Ltaf regime has been specifically designed to provide a regulated fund structure that provides a framework to invest into these assets."

In a bid to solve the liquidity mismatch issue, Ltafs cannot permit redemptions any more frequently than monthly and they must have a notice period of at least 90 days on redemptions.

Ltafs are currently aimed at giving sophisticated investors and defined contribution pension schemes access to illiquid or long-term assets, such as infrastructure, private equity and real estate. 

But last year the FCA launched a consultation on expanding access to Ltafs to retail investors who are categorised as "restricted" as well.

Restricted investors are those who sign a statement agreeing not to invest more than 10 per cent of their assets into non-readily realisable securities - a category originally introduced as part of the FCA's regulation of peer-to-peer investing.

Sarah Pritchard, executive director of supervision, policy and competition at the FCA, said: "We made these rules to create an environment where investors that wish to invest in productive finance assets can more easily do so.   

"It was for market participants to make this a reality and it is good to see this product innovation now taking place."

damian.fantato@ft.com