DC pensions industry expects rise in number of LTAFs

The UK’s defined contribution (DC) pensions industry expects the number of Long Term Asset Funds (LTAFs) to increase significantly over the next few years, according to new research published by the DC Investment Forum (DCIF).

DCIF’s research shows that a platform has reported it is in touch with 20-30 investment managers that are at various stages of developing LTAFs, while another claims it is also aware of several LTAFs are awaiting approval from the Financial Conduct Authority (FCA).

Imran Razvi, senior policy adviser at The Investment Association, echoes the observations, adding that more evolution in the types of LTAF available is likely.

He said: “We do expect to see more launched. I think our sense is the LTAFs that are currently available are more of a multi-asset, one stop shop approach to private markets. But increasingly you might see more asset class specific products as well.”

Pension schemes are also monitoring developments with interest, with all of Mobius Life’s clients interested, and all those with more than £1bn (€1.2bn) of assets under management either working on private markets solutions or having already added private markets to their portfolios.

However, as the DCIF noted in a previous private markets paper, published in March 2024, schemes want to access private markets in different ways, creating challenges for asset managers.

Some see LTAFs as the end game; others are on a path to co-investment. As schemes grow, they are likely to reach more of a consensus about how they want to access private markets, making it easier for asset managers to innovate, DCIF stated.

The research also covers schemes’ mixed feelings about performance fees, how schemes are managing cost pressures, and where private markets fit in the DC glidepath.

Mark Austin, chair of the DCIF, said: “We are truly seeing innovation at play, driven by demand from pension schemes wanting to access private markets in different ways. The research highlights the fact that education remains an important area of focus for pension schemes to understand and overcome the value of private market investments and the financial benefits they can contribute towards members’ retirement outcomes.”

Fidelity International was one of the latest firms to receive regulatory approval from the FCA to launch its first LTAF to provide investors with access to a globally diversified range of public and private asset classes.

Schroders was first to announce regulatory approval for an LTAF, in March 2023, while HSBC and WTW announced launches in March and April this year, respectively. 

In June Arcmont and Carne Global announced having received approval from the FCA for a joint private debt LTAF.

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