UK LTAFs: Playing the long game

Legal forms and regulatory classification

LTAFs are open-ended and regulated by the FCA. All LTAFs are classified as alternative investment funds and are subject to the Alternative Investment Fund Managers Regulations 2013 (and must, therefore, be managed by an AIFM, with additional requirements depending on the legal form adopted. 

LTAFs can be structured in three main ways, each with its own rules:

• Authorised Contractual Scheme (ACS): Established under the Collective Investment in Transferable Securities (Contractual Scheme) Regulations 2013 and authorized under Section 261C of the Financial Services and Markets Act 2000 (FSMA). An ACS may be structured as a co-ownership or limited partnership scheme and has no separate legal personality.
• Authorised Unit Trust (AUT): Established by trust deed and authorized under Section 243 FSMA. In such case, the LTAF’s scheme property is held on trust for the participants.
• Investment Company with Variable Capital (ICVC): Authorized under the Open-Ended Investment Companies Regulations 2001 and Section 236 FSMA; commonly referred to as an open-ended investment company (OEIC).

The FCA’s rules and guidance with respect to UK LTAFs can be found in Chapter 15 of the FCA’s Collective Investment Schemes sourcebook (COLL 15) as well as in FCA Policy Statement PS21/14.

Investment strategy and powers

The investment strategy of an LTAF must be to invest mainly in long-term illiquid assets and the FCA expects LTAFs to allocate at least 50 percent of their value to unlisted securities and other long-term assets (such as immovables, property, specified investments, commodities or other collective investment schemes investing in such securities or long-term assets). An LTAF may have a strategy of investing mainly in a mix of unlisted assets and listed but illiquid assets, but managers must ensure a prudent spread of risk. LTAFs may also make loans under certain conditions.

Borrowing and leverage

LTAFs may borrow up to 30 percent of their net asset value and managers must ensure that borrowing is consistent with the fund’s liquidity profile and redemption policy. However, the FCA does not impose limits on aggregate borrowing by an LTAF’s underlying investments.

Governance and management

Only full-scope AIFMs with the appropriate FCA permissions and the skills, knowledge and experience necessary to understand the activities and risks involved, may manage an LTAF. The AIFM must also employ sufficient personnel with the skills, knowledge and experience necessary to discharge its responsibilities. LTAFs must have robust governance arrangements and responsibility for compliance with certain regulatory obligations (for example, suitability assessments for investors, ongoing monitoring of liquidity or valuation processes) must be allocated to an FCA-approved person.

Depositary

All authorized funds in the UK, including LTAFs, must appoint an authorized depositary. The depositary’s main duties include: safekeeping of the fund’s assets, oversight of the manager’s activities to ensure compliance with the fund’s rules and regulations, monitoring cash flows and ensuring that investor money is properly handled and ensuring that the fund’s income is applied in accordance with its rules.

Valuation

Managers must appoint an external valuer unless they can demonstrate the necessary competence and experience to perform valuations internally. 

Disclosure and reporting

LTAFs are subject to extensive disclosure requirements. The prospectus must include certain prescribed disclosures, such as a description of the fund, investment objectives and strategy, assets, investment techniques and risks, valuation methodology, investor rights, and dealing procedures. LTAFs must report quarterly on portfolio investments, transactions, and significant developments, in addition to producing half-yearly and annual reports.

Redemptions and liquidity management

LTAFs cannot offer daily dealing and may redeem units no more frequently than monthly. A minimum 90-day notice period for redemptions is required, with many funds adopting longer periods. LTAFs may use a range of liquidity management tools, provided these are disclosed in the prospectus.

Marketing and investor protections

LTAFs are classified as Restricted Mass Market Investments (RMMIs) and are considered high-risk by the FCA. The RMMI regime mandates additional protections for retail investors, including prominent risk warnings and appropriateness assessments for all retail investors wishing to invest in LTAFs.

Latest developments

The LTAF regime continues to evolve, with several notable recent developments:

• Increased market interest and uptake: As of March 2025, there has been a marked increase in the number of LTAFs coming to market, with 12 umbrella LTAFs and 22 sub-funds now authorized. Market research published by the Carne Group in November 2024¹ indicated that 82 percent of UK asset managers with a European presence are considering launching an LTAF within the next three years, reflecting growing confidence in the regime and increasing appetite for private assets among institutional investors.
• Regulatory authorization timelines: The FCA has streamlined its authorization process, with the average time to authorize an LTAF standing at approximately three months in Q1 2025², although the FCA may take up to six months in some cases.³  
• Expansion of retail access: Since July 2023, LTAFs can be marketed to certain retail investors, provided the RMMI regime’s enhanced protections are met. This has broadened the potential investor base, although the FCA continues to emphasize the high-risk nature of LTAFs and the need for robust appropriateness assessments and risk disclosures.
• Thematic focus: Recent LTAF launches (see below) suggest a trend towards thematic investment strategies, particularly in areas such as climate transition, renewable energy and sustainability. 
• Ongoing challenges: Despite increased interest, uptake among smaller defined contribution pension schemes remains limited, primarily due to the perceived complexity and cost of investing in illiquid assets. The FCA and industry stakeholders continue to explore ways to address these barriers and promote wider adoption.
• Market confidence and outlook: The gradual increase in the number of authorized LTAFs and the entry of major asset managers into the market suggests growing confidence in the regime. As regulatory familiarity increases and the demand for private assets continues to rise, the LTAF is expected to play an increasingly important role in the UK’s investment landscape.

LTAFs in the market

• Schroders Capital launched the Climate+ Long-Term Asset Fund (focusing on climate mitigation, adaptation, natural capital, biodiversity and social vulnerabilities) in March 2023 and the Greencoat Global Renewables+ Long-Term Asset Fund (dedicated to renewable energy and energy transition infrastructure) in October 2023.
• Aviva Investors launched the Climate Transition Real Asset Fund (real estate, infrastructure and low-carbon transition assets) in November 2022, the Real Estate Active LTAF (direct real estate with a sustainability focus) and the Multi-Sector Private Debt LTAF (diversified private debt) in October 2023, and the Venture & Growth Capital LTAF (early-stage companies and technologies) in March 2024.
• Carne Group and Willis Towers Watson launched the CG WTW Private Equity Access LTAF (private equity primarily through co-investments) in March 2024.

Conclusion

The LTAF regime represents a significant development in the UK funds landscape, providing a regulated structure for investment in long-term and illiquid assets. While initial uptake has been measured, interest is continuing to grow among asset managers and institutional investors, particularly as regulatory familiarity increases and the demand for private assets continues to rise. The LTAF offers a flexible, robust framework for accessing a broad range of private market opportunities, with strong governance, disclosure, and investor protection standards.