The UK government is set to allow retail investors to invest in long-term asset funds (LTAFs) through their stocks and shares ISAs, enabling them to invest in private markets through these tax-saving vehicles for the first time.
LTAFs are open ended funds which have been designed to provide easier retail access to long-term private markets investments, such as private credit.
The UK government will allow savers to hold these in their stocks and shares ISAs from “next year”, it announced today as part of sweeping reforms into the UK’s investment landscape.
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“The government will allow LTAFs to be held in stocks & shares ISAs next year, allowing more individuals to invest in assets that will support the UK’s future success, like innovative businesses and infrastructure – which can also deliver better returns,” it said.
A number of major private markets firms have launched their own LTAFs. For example, Partners Group launched a private credit-focused LTAF at the start of this year after getting approval from the UK regulator, the Financial Conduct Authority.
“We’re extremely pleased that LTAFs will now be incorporated into the stocks and shares ISA – a reform we have long called for to broaden access to private markets,” said Chris Cummings, chief executive of the Investment Association.
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Michael Aldridge, president of Accelex, agreed that the government’s move will allow retail investors to tap into “lucrative” private markets returns through their tax-managed accounts, but warned that this is a “double-edged sword”.
“Private markets are notorious for their lack of transparency, with even seasoned institutional investors struggling to get the data and visibility they need to make smart decisions in the space,” he said.
“For retail investors considering investing in LTAFs, this lack of clarity could mean taking on risks without having a full picture of their investments.
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“If the government wants to boost retail investment into private markets, it must take strong measures to improve clarity over private assets’ valuations and performance.”
