The Financial Conduct Authority (FCA) has introduced new rules and guidance aimed at facilitating investment in long-term illiquid assets (such as venture capital, private equity, private debt and real estate).
The mechanism that the FCA has launched is a new authorised open-ended fund structure known as the 'Long Term Asset Fund' (LTAF). The reason behind this move is to tackle the current hurdle created by the lack of a UK authorised open-ended fund structure that enables investment in long-term illiquid assets while offering the required structural safeguards.
A key requirement specific to LTAFs is that of fair and accurate valuations on at least a monthly basis. Given that the assets within an LTAF are likely to be illiquid and many will not have regular market prices, the depositary will be required to determine that the authorised fund manager has the resources and procedures for carrying out a valuation of the assets.
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.