Written by Zhuan Faraj

On 25 October 2021, the FCA published a policy statement entitled ‘A new authorised fund regime for investing in long term assets’ (PS 21/14) (the “Policy Statement”).

The Policy Statement finalises rules for a new category of open-ended authorised fund: the Long Term Asset Fund (“LTAF”). The LTAF is intended to facilitate an environment in which investors that wish to invest in productive finance assets can do so; this Policy Statement follows the FCA’s Consultation Paper of May 2021 and a series of recommendations published by the Productive Finance Working Group in September 2021.

Key changes to the rules previously proposed by the FCA in the Consultation Paper include:

  • Redemptions – The new rules require LTAFs to permit redemptions no more frequently than monthly, and to have at least a 90-day notice period. The Policy Statement explains that these are minimum requirements, and that longer notice periods or less frequent dealing are likely to be appropriate for some LTAFs.
  • Distribution – The FCA has amended its proposed distribution rules in order to enable LTAFs to be promoted to high net worth individuals in addition to sophisticated and professional investors. However, the FCA has said that it will consult in the first half of 2022 on broadening the LTAF distribution rules to a wider retail audience.
  • Permitted links – The FCA has amended the requirements on permitted links following technical feedback around unintended barriers to these rules.

The FCA has also said that it plans to consult on amending the requirement for the depositary to be the legal owner of an LTAF’s non-custodial assets and that where a firm wishes to launch an LTAF under the new rules, it will consider applications to waive this requirement.

The new Handbook rules and guidance will come into force on 15 November 2021, and the Policy Statement can be accessed and read in full here. The FCA encourages firms which are considering making an authorisation application for an LTAF to engage with it prior to submitting an application.