Retail access to the LTAF – Simmons’ response to the FCA’s proposals

Simmons & Simmons has long advocated for a suitable regime in the UK, which enables much broader access to long-term and productive capital investments.

More recently, through our participation on both the Steering Committee and Technical Expert Group of the Bank of England / HMT / FCA Productive Finance Working Group, we have been actively engaged in raising awareness of investment opportunities in less liquid asset classes among pension fund trustees including the development of the Long-Term Asset Fund (LTAF) as a vehicle appropriate for distribution to both professional and retail investors.

To this end, we have responded to the FCA’s recent consultation paper CP22/14, “Broadening retail access to the long-term asset fund” – for our summary of the CP, see here.

In our submission, we

• support the extension of the types of investor to whom the LTAF can be distributed
• consider that the FCA’s proposals represent a proportionate way of expanding retail access to the LTAF in the broader context of the FCA’s revised retail financial promotions regime
• encourage as a priority further progress being made in developing the ISA regime to allow investment in the LTAF as part of a “long-term ISA”
• argue that the FCA’s proposals will allow access for the mass retail market with appropriate safeguards so retail investors will be adequately warned about the risks and (unless in receipt of tailored advice) will be restricted from investing more than 10% of their investable assets
• note that the CP does not propose the option of establishing either a “retail LTAF” or a “professionals LTAF”, as we see with the evolving EU ELTIF regime. If a vehicle is intended as a “professionals only” offering aimed only at Defined Contribution pension funds, on the proposals as they stand, it will have to adopt a level of prescription that is arguably more suited to a retail product
• query the FCA’s proposed blanket categorisation of LTAFs as “high risk” – LTAFs could be invested in less volatile and arguably less risky assets than, for example, a daily-dealing listed equities fund, but the fact that LTAFs will deal less often seems, on the current proposals, to ‘trump’ the portfolio risk.

Click here to see a copy of our response to CP22/14.