Morgan Stanley Investment Management is mulling a long-term asset fund (LTAF) in the UK after its recent European long-term investment fund (ELTIF) launch, as the firm looks to strengthen its multi-asset offering.
The asset manager launched an ELTIF at the end of last year, targeting middle-market opportunities across Europe, the US and Asia.
Steve Turner, head of investment selection for the Portfolio Solutions Group at Morgan Stanley Investment Management told Alternative Credit Investor that the LTAF is now under active consideration.
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“That is a potential extension of this fund based on demand assessment,” he said. “It is something we are exploring.”
The ELTIF is managed by the Portfolio Solutions Group, which is part of Morgan Stanley, and offers individual investors global exposure to private equity, private credit, real assets and select public investments. It can also cater for institutional investors on demand.
Detailing the ELTIF’s approach to private credit, Turner said the long-term objective is to deliver total return at an “attractive absolute level”. Over time, private credit is expected to make up around 10–20 per cent of the fund, with a slight bias towards equity.
“It is a minority piece, but we can flex that up and down if we see attractive opportunities,” he said.
In the near term, private credit will take on a much larger role, primarily as it can be deployed quickly and helps build “early diversification and income”.
“Then, very selectively and in a measured way, [we will] build up the co-investment portfolio for private equity and real assets,” Turner added. “So, in the near term, the portfolio is likely to have 40 to 50 per cent in private credit.”
The asset manager chose to launch its ELTIF because it sees strong appetite for multi-asset allocations in Europe, particularly among investors who are not already heavily invested in alternatives or who prefer a diversified, risk-managed approach, Turner said.
The ELTIF aims to partner with third-party managers to access high-conviction co-investments and allocate to global themes such as digitisation and sustainability. It is targeted at individual investors, including mass-affluent and retail clients, with distribution to be carried out “through intermediaries that Morgan Stanley has deep relationships with”.
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The fund was launched under the new ELTIF 2.0 framework, which Turner said has created the regulatory “clarity” needed for managers to design products of this type. The updated regime was designed to make ELTIFs more flexible and easier to distribute by broadening the range of eligible assets, including private credit, and lowering investment minimums.
However, Turner noted that further refinement is still needed.
“Where we would like it [the framework] to go from here, we are seeing clarifications as we step through it,” he said. “As the ELTIF 2.0 framework is relatively new, some of it is open to interpretation. So, we are doing a bit of discovery of how to interpret it, and we are stepping through that very carefully.”
