The UK’s Long-Term Asset Fund (LTAF) and the European Long-Term Investment Fund (Eltif) are emerging as critical vehicles for wealth managers and Defined Contribution (DC) pension schemes to access the highly sought-after private asset classes, according to a new report by Carne Group.
The report has indicated that 78% of UK and US asset managers with a European presence are exploring LTAF launches to tap into this growing demand.
UK pension schemes aim to boost their private market allocations by 10% over the next three years, while wealth managers expect private market assets to comprise 11% of their portfolios by 2030, up from 5% in 2021.
The report, which surveyed 201 investors across the UK, Europe, and the US, also revealed that fund structures like LTAFs and ELTIFs are instrumental in opening private market access for DC savers and wealth clients. About 88% of wealth managers and 78% of DC schemes expect private market investments to increase within three years due to the opportunities offered by LTAFs and Eltifs. Moreover, 28% of wealth managers and 31% of DC schemes foresee a “dramatic” increase, underscoring the anticipated impact of these funds on private market participation.
ELTIFs and LTAFs: Is the hype warranted?
Despite the enthusiasm, current access to private markets remains limited; only 24% of wealth managers and 18% of DC schemes currently utilise an LTAF or Eltif. However, Carne’s findings indicate that both UK and US asset managers are responding to the untapped potential. Approximately 74% of US asset managers with a European footprint and 82% of UK asset managers are contemplating LTAF launches to bridge this gap, while 42% of US and 28% of UK managers are also considering Eltifs.
Regulatory complexity stood out as a key barrier for asset managers. Carne’s survey found that 68% of asset managers expect a 25% to 50% increase in compliance costs over the next two years, driven by heightened regulatory demands. To address these challenges, 87% of managers anticipate increasing their reliance on third-party providers to manage compliance, expedite market entry, and enhance transparency in reporting.
Jeremy Soutter, MD at Carne Group, said: “In the UK alone, DC assets are set to reach £1 trillion by 2030, with UK schemes looking to increase their allocation to private markets.” He noted that LTAFs and ELTIFs serve as “critical routes into illiquid asset classes” and will be essential for asset managers aiming to enter this market effectively.
Soutter also observed that some asset managers may not need to launch their own LTAF or Eltif, as “DC master trusts now have, or plan to have, their own LTAF structures,” which could allow asset managers to act as sub-advisers within these frameworks.
He cautioned that “launching an LTAF can be a complicated, lengthy, and costly process,” intensified by competitive pressure, the need for cost-effectiveness, and complex regulations. “Carne is therefore witnessing a significant number of asset managers turn to third-party specialists” to navigate regulatory requirements and achieve a timely market entry.
