The private asset step change: 78% of UK and US asset managers consider LTAF launches – Jeremy Soutter, Managing Director

Private assets are in demand. First came the sentiment shift. Now, asset managers are following up with products. Our researchi indicates 78% of UK and US asset managers with a European presence are considering launching an LTAF over the next three years. The opportunity is large: just 24% of wealth managers and 18% of DC pension schemes currently use an LTAF (or ELTIF) for private markets. Here, we examine what this step change in supply and demand means for asset managers.

In our Pinpoint of view series, Carne experts take a deeper dive into the themes that matter to clients.

Move fast and don’t break things

Retail wealth managers and DC pension schemes have a material need for private markets.

Asset allocators at UK and European DC pension schemes expect to make 10% more private market investments over the next three years. Wealth managers expect to allocate 11% of AUM to such assets by 2030. In 2021, it was a mere 5%.

With DC assets in the UK alone set to reach £1trillion by 2030, this is a significant opportunity for asset managers.

Our research shows the UK’s Long-Term Asset Fund (LTAF) and Europe’s Long-Term Investment Fund (ELTIF) are quickly becoming the superhighways towards private assets:

• Substantial untapped demand: just 24% of wealth managers and 18% of DC schemes now use an LTAF or ELTIF to invest in private markets
• A step change in product launches: 82% of UK managers and 74% of US managers with a European presence are considering LTAF launches. For ELTIFs, the respective numbers are 28% and 42%
• LTAFs and ELTIFs are major routes to private markets: 88% of wealth managers and 78% of DC pension schemes expect increased participation over the next three years because of LTAF/ELTIF opportunities

Once launched, LTAFs and ELTIFs can offer rapid and smooth access to private markets.

But the route towards launch has roadblocks. At the top of that list is regulation, according to US and UK managers. Around two thirds of the managers we spoke with expect to spend an additional 25% to 50% on complying with LTAF and ELTIF regulations.

There are also structural challenges. For example, with UK DC master trusts creating their own LTAFs, such as LifeSight’s recent launch, asset managers may need to become a sub-adviser, within a client’s LTAF umbrella structure.

Small wonder that investment managers are seeking third-party support. Most expect to outsource more over the next five years. This enables them to combat regulatory risk, achieve greater speed to market and improve transparency for reporting.

Managers have much to consider – especially with the tight deadlines set by pension schemes and wealth managers.

In some circumstances, launching LTAFs or ELTIFs can be complicated, lengthy and costly. A third-party specialist can bring precision and acceleration, ensuring many of these risks are mitigated, minimised or moved off the register entirely.

If you would like to know more about Carne’s work to improve transparency in open-ended illiquid funds, or if you would like to discuss your own requirements, please contact us on contact@carnegroup.com

i All data in this Pinpoint of View derives from Carne Group’s latest Atlas Report. Carne Group commissioned the market research company Pureprofile to interview 201 senior executives working for US and UK private market fund managers, as well as UK and European DC pension schemes and wealth managers. 50 US private market fund managers collectively manage $805 billion in AUM; 50 UK private market fund managers collectively manage $682 billion in AUM; 51 UK and European DC schemes collectively manage $317 billion in AUM; 50 UK and European wealth managers collectively manage $126 billion in AUM. Collectively, the organisations of those surveyed manage $1.93 trillion. Those interviewed included COOs, CFOs CROs, Heads of Product, Heads of Compliance, Head of Legal and senior fund managers. The survey was conducted in May 2024.

*About the research

Carne Group commissioned the market research company Pureprofile to interview 201 investors working for pension funds, family offices, wealth managers, insurance asset managers and consultants to institutional investors and asset managers in the UK, Germany, Switzerland, Italy, France, the Netherlands, Norway, Finland and Denmark with a total of $1.7 trillion assets under management.

The survey was conducted in December 2023 and January 2024.

This publication has been prepared for general guidance on matters of interest only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice.