Long-term asset funds (LTAFs) have become more accessible to UK retail investors through ISAs, expanding access to private markets as the vehicles reach £7.3bn in assets.
This week, the Financial Conduct Authority (FCA), the UK’s financial regulator, permitted LTAF investments within stocks and shares ISAs. The open-ended vehicles are designed to enable investment in illiquid assets such as private credit.
It comes as a recent survey by Morningstar found that despite LTAFs now having around £7.3bn in assets under management (AUM), up from £5bn in June 2025, the market remains institutionally dominated.
Overall, most of the assets under management come from defined contribution pension schemes, while adoption through the retail channel remains limited.
Morningstar said the FCA’s move could potentially act as a “catalyst” for further AUM growth and new LTAF launches through the retail channel. It could also lead to progress in platform availability, the firm said.
“Allowing LTAFs into stocks and shares ISAs is an important signal of the direction of travel,” said Evangelia Gkeka, principal, manager research at Morningstar. “It has the potential to broaden access to private assets, but it doesn’t remove the need for careful due diligence.”
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Morningstar also found that retail platform adoption of LTAFs has been cautious, with providers awaiting clearer evidence of demand from wealth managers, advisers and retail investors.
This comes amid jitters in the US wealth market, where business development companies (BDCs) have experienced high levels of redemptions, above the five per cent tender offer, over concerns about asset quality and software exposure amid the AI boom.
“These are complex, semiliquid products, and education, particularly around liquidity terms, fees, valuation and allocation processes and realistic risk return expectations, will be critical if the retail channel is to scale responsibly,” Gkeka said.
Typically, LTAFs allow up to five per cent of net asset value to be returned to investors each quarter after they have served a notice period and, in some cases, a lock-up period.
The research also found there are currently 25 LTAF strategies for sale in the UK, with the large majority focused on private multi-asset or private debt.
