In our Pinpoint of View series is designed to bring you expert industry insights. In this edition, Jignasa Patel discusses the significant rise in Long-Term Asset Funds (LTAFs).

It’s been one year since former Chancellor Jeremy Hunt announced the Mansion House Compact – serving as a watershed moment for the democratisation of private markets for UK pension savers. While pension schemes have been considering allocations to private markets for some time, the Compact has catalysed these initiatives.

For the UK, this has been further enabled by the introduction of the Long-Term Asset Fund (LTAF) structure. Since its introduction two years ago, we have seen a significant rise in fund managers planning to launch these types of funds and are now seeing them come to market.  As an example, we were recently approved as the host Authorised Corporate Director (ACD) for the Arcmont LTAF one of the first LTAFs to come to market.

And while in its infancy, it looks like the LTAF market is set to see significant growth. Our latest research1, Carne Atlas 2024 report shows that UK and European DC schemes are planning to increase their private markets allocations meaningfully over the next five years. This includes private equity, private credit, infrastructure and other strategies. Some 78% of DC schemes also expect private market investment within LTAFs and ELTIFs to grow over the next three years. Of that group, with 31% expect a ‘dramatic’ increase.

Our research also indicates that managers expect more regulatory scrutiny of private assets investment. Other challenges include managing liquidity, asset valuation, ESG scrutiny and novel fund structuring. As a result, we are seeing asset managers turning to third-party specialists for expert support to help navigate the private market regulatory regime.

Our private markets experts are already helping a growing number of fund management groups build a lasting DC proposition across the UK and EU markets.

These are just some of the key findings in Carne’s Atlas 2024 Report. The full report investigates these trends in greater detail as well as providing insights into the views of managers in continental Europe and the US. The report also includes further details on which specific private asset classes are attracting the most investor interest and the potential in innovative fund structures to attract new capital.

1 Research commissioned of 51 UK and European DC pension schemes collectively managing $317 billion in AUM. The study was conducted in May 2024 by the market research company Pureprofile.

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