Since their introduction four years ago, long-term asset funds (LTAFs) have become a focal point for asset managers seeking to open up private markets opportunities to a broader audience.
LTAFs are a popular vehicle because they enable long-term investors to gain exposure to a mix of assets – from private equity and private credit to real estate and infrastructure – that are not traded on public markets.
Aegon Asset Management, Aviva Investors, BlackRock, Fidelity International, Legal & General and Schroders Capital are among those to have launched their own version.
This growing appetite marks a decisive step towards democratising access to private assets, a space once reserved for institutional investors.
We see LTAFs as complementary to VCTs and the private markets investment trusts already on our platform, offering greater choice to our clients
The Financial Conduct Authority introduced the LTAF framework in 2021, with Schroders Capital bringing the first authorised fund to market in 2023.
Since then, the appeal of LTAFs has rocketed. The question is, what exactly is driving this demand?
Policy tailwinds build momentum
Much of the early traction for LTAFs can be attributed to government continuity and regulatory support. Successive administrations have prioritised mobilising long-term capital into the UK’s private markets, and the LTAF sits at the heart of that ambition.
Schroders Capital director of private markets James Lowe believes this alignment of policy and regulation is strengthening the market.
The foundations were laid in 2020 when then-chancellor Rishi Sunak committed to launching LTAFs as an investment vehicle.
That momentum has continued under the current government, perhaps helped by chancellor Rachel Reeves confirming that, from 2026, LTAFs will be eligible to be held within stocks-and-shares Isas – a move expected to widen their appeal among retail investors.
The wealth management industry is fundamentally reimagining portfolio construction – incorporating alternatives that may offer investors an opportunity to enhance resilience
Research from the Investment Association suggests this policy shift is already changing perceptions. It found that 57% of UK investors would consider investing in LTAFs following the Isa announcement, with the top motivations being protection against inflation (76%), portfolio diversification (67%) and stronger long-term growth potential than that of public markets (61%).
Appetite was strongest among younger investors, with 77% of Millennials and 70% of Gen Z expressing interest, compared with 41% of Babyboomers.
Adviser and pension demand gathers pace
Even before the Isa announcement, Schroders was seeing genuine investor demand. Its first LTAF was launched specifically for the defined contribution (DC) pensions market, a key focus of the government’s Mansion House reforms.
The Mansion House Accord, announced earlier this year, saw 17 of the country’s largest workplace pension providers pledge to allocate at least 10% of their DC default funds to private markets by 2030, with half of that targeted at UK assets. The government expects this to unlock up to £50bn for private markets investment, including £25bn channelled into UK businesses and infrastructure.
Lowe says Schroders is seeing established demand for LTAFs in the DC pensions channel. While acknowledging that the market remains at an early stage, he adds that LTAFs are gaining significant attention from the wealth and advice sectors.
Advice firms are at different stages of building private markets allocations, he notes, but interest is accelerating, particularly among high-net-worth investors.
These launches directly address the surging appetite of individual investors for private markets strategies
Larger advice networks and discretionary fund managers are also developing products that integrate private markets exposure. For many, Lowe says, the LTAF will be a key vehicle to achieve this.
Demand is not just theoretical. Schroders reports growing engagement from advisers, and the distribution infrastructure is starting to catch up.
Hargreaves Lansdown recently partnered with Schroders Capital to add two of its LTAFs to the platform, the first time such funds have been made available within a Sipp wrapper. The move, it says, enables investors to access diversified sources of long-term investment growth.
Hargreaves Lansdown chief investment strategist Emma Wall says that, since launch, the firm has seen good levels of engagement with its advanced investing hub. She adds that the firm plans to onboard additional LTAF providers.
The UK remains significantly underinvested in private markets compared with Europe and the US
“We see LTAFs as complementary to VCTs [venture capital trusts] and the private markets investment trusts already on our platform, offering greater choice to our clients,” says Wall.
At the end of October, Hargreaves Lansdown announced it had reached two million active clients and a record £172.7bn in assets under administration, attributing part of that growth to its LTAF and VCT offering.
Private markets push fuels product innovation
The broader driver behind this momentum is the surge of interest in private markets among both institutional and retail investors, with asset managers racing to meet that demand.
Global player Nuveen, for example, has expanded access to its $300bn (£230bn) alternatives platform by introducing two private markets strategies for qualified individual investors in Europe and Asia. These will be distributed through intermediary platforms, offering access to its $142bn real estate and $80bn private credit portfolios.
Nuveen head of global wealth advisory services Jeff Carlin says: “These launches directly address the surging appetite of individual investors for private markets strategies, which is a trend we’re seeing globally.
We plan to onboard additional LTAF providers
“They come at a transformative moment when the wealth management industry is fundamentally reimagining portfolio construction – incorporating alternatives that may offer investors an opportunity to enhance resilience and pursue compelling risk-adjusted returns amid today’s unprecedented market complexity.”
From niche to mainstream
Lowe notes that the UK remains significantly underinvested in private markets compared with Europe and the US.
That gap, he says, presents a major opportunity for advisers seeking diversification and enhanced returns. Many of the advice businesses Schroders engages with already identify a portion of their client base for whom LTAFs are both suitable and relevant.
Combined, these factors – supportive policy, platform access, adviser engagement and investor appetite – have propelled LTAFs from concept to credible product in just a few years.
Although the market is still developing, the direction of travel is clear: private markets are no longer the preserve of the institutional elite. Through the LTAF structure, they are fast becoming an integral part of the modern diversified portfolio – and an increasingly important subject of conversation for UK advisers and their clients alike.
Darius McQuaid is a reporter for Money Marketing
