Isio responds to the FCA’s consultation on a new regime for investing in illiquid assets
The Financial Conduct Authority (FCA) recently consulted on a set of proposal for a new category of authorised open-ended fund called the long-term asset fund (LTAF). This is designed to enable authorised funds to be set up to invest efficiently in long-term, illiquid assets.
We believe that there is a strong case for investors to include illiquid assets as part of their overall strategy, beyond traditional property allocations. However, defined contribution (DC) schemes have tended to lag behind the progress being made by defined benefit schemes. We are encouraged by the FCA’s willingness to support the development of the LTAF which should help to address a number of the practical implementation challenges and accelerate wider adoption across more DC schemes.
In our view, getting Master Trusts to incorporate illiquid assets within their default strategies is going to be key to achieving the FCA’s objective of increasing exposure to these assets by DC arrangements. The commercial head-winds will be demonstrating to existing and potential customers of the Master Trust that the long-term benefits of having access to these assets will outweigh any modest increase in charges.