It has been almost three years since Schroders launched the UK’s first long-term asset fund (LTAF), and the asset manager has firmly established itself as a leader in the market. The firm now has two LTAFs available for the wealth market in the UK and has a partnership with Hargreaves Lansdown to host them on its platform.
Alternative Credit Investor spoke to James Lowe (pictured), director, private markets, UK wealth at Schroders Capital, about how the market has changed over the past few years and where he sees it going next.
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“The last year has been really interesting, as we’ve gone from having hypothetical conversations with the wealth market off the back of the first launches, to now seeing wealth businesses moving from hypothetical into practical implementation,” Lowe said. “It’s a super exciting time for private markets in the UK wealth market.
“We saw the first Self-Invested Personal Pension (SIPP) access last year through our partnership with Hargreaves Lansdown, and we’re talking to other SIPP providers, so we’re hopeful we’ll see more of those in the future.”
Lowe said he sees the SIPPs as “really well-aligned” with LTAFs and as a way to drive more retail investment into private markets.
“I think we’ll see more of that this year,” he said. “Firms are working together to solve some of the challenges that previously existed around market infrastructure. There’s quite a lot of development underway – the Platform Association is working with its membership to look at some of the challenges for platforms in offering LTAFs, the Investment Association is working with asset managers – and we’re trying to come together as an industry to solve the infrastructure challenge.”
Lowe said the next real challenge is around investor demand, although he says this is steadily improving.
“Obviously we can have the right products, policy and platforms, but you also need to have investors who want to buy the products,” he said.
“That’s definitely transformed in the last few years, I think mainly because private markets have significantly scaled and they’re a bigger portion of how the real economy is financing itself.”
In terms of clients, Lowe said business is mainly coming from high-net-worth (HNW) individuals and family offices, but he sees the partnership with Hargreaves as a stepping stone to driving more interest from retail investors. He added that the UK’s Mansion House Accord – a pledge for 17 of the largest defined contribution pension providers to invest 10 per cent into private markets by 2030 – shows retail investors should be able to access it.
“The highest amount of demand for private markets in the UK is currently through global banks or family offices, and then as you go down the scale it’s from larger advice networks and HNW discretionary managers,” he said.
“But our view is that the SIPP is a long-term pool of capital and there’s no reason why a retail investor with a SIPP shouldn’t be able to access long-term investments. The Financial Conduct Authority is to a degree trying to democratise these asset classes and I think the LTAF plays a really key role in that going forward.”
