Long-Term Asset Fund to boost investment from DC pensions

The Investment Association is today setting out the detail of how the new proposed Long-Term Asset Fund will help widen access to more illiquid assets, opening up investment opportunities for a range of customers, particularly those saving in Defined Contribution (DC) pension schemes over many decades.

The fund would use an adapted version of a Non UCITS Retail Scheme (NURS) to create a new category of fund that will have three key features:

• The ability to invest widely in private markets, funding companies and wider projects, including public infrastructure and housing.  
• Allow redemptions to be structured to reflect the time it takes to sell these investments, with flexibility from daily to up to two years.
• Build on the high standards of customer protection already present in NURS. 

The proposal forms part of a package of measures submitted to the Treasury as part of the work of the Asset Management Taskforce, which brings together industry figures and Government officials to tackle the big issues facing the industry.

Chris Cummings, Chief Executive of the Investment Association, said:

“Investment management is critically important to the UK economy, and our industry is always looking for the best ways to meet customer needs, while channelling vital investment into UK infrastructure and innovative firms to help drive economic growth.

“We have heard from DC schemes whose members will benefit from the long-term diversification provided by illiquid assets. They would like access to investment vehicles that allow for regular investment with valuations that reflect the underlying assets. They are investing over many decades and do not need to focus on daily redemptions.”

“Our Long-Term Asset Fund proposal sets out a detailed blueprint, providing an additional route for patient capital to flow into the economy, and we look forward to working with the Treasury and the regulator on the next steps required to make these proposals a reality.”

The package also includes:

• The creation of a new ‘Onshore Professional Fund’, which will help to promote the UK’s competitiveness in the professional investor space, creating a more open environment for the alternatives sector.
• The creation of a single FCA rulebook for the investment industry. This book would roll the current COLL, FUND & PROD sourcebooks into one place, and make it easier for investors, especially those from overseas navigating the UK regulatory landscape, to understand the UK regulatory regime. It would also aid transparency, as all fund rules would now be in one place.
• A range of measures to ensure that investment funds can be used more effectively in the retirement income market. These include possible areas for fund innovation in retirement products, measures to enhance tax efficiency of funds for retirement savers and wider issues such as the consistency of disclosure across different product sets.

Chris Cummings continued:

“Simplifying the rulebooks into one document will help to send an important signal to both our domestic and overseas customers. The UK regulatory regime needs to be seen as consistent, coherent and world class. By working in partnership, this package will help to achieve those objectives within a structure that can best demonstrate the results.”