Long-term asset funds (LTAFs) look poised for a retail breakthrough after the UK government confirmed they will be eligible for Stocks & Shares individual savings account (ISAs) from 2026, though Morningstar has urged caution on liquidity, fees and valuation.
Long-term asset funds (LTAFs) are open-end vehicles launched in the UK in 2021 to offer broader access to illiquid private assets. FCA-authorised, they’re aimed at defined contribution pension schemes and private wealth clients.
Evangelia Gkeka, senior analyst for fixed income strategies at data provider Morningstar, said the change “could serve as a catalyst for assets under management growth in LTAFs via the retail channel, driving progress in platform availability.” While the LTAF market “remains relatively immature,” she added, its promise of diversification and access to higher returns makes it “an attractive proposition for investors.”
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According to Morningstar data, FCA‑approved LTAFs currently manage around £5 billion, with a further c.£3 billion of committed capital yet to be called. The universe has just over 20 strategies are on sale in the UK — but Morningstar expects continued growth as the product structure beds in and distribution opens up.
Gkeka added: “It is paramount for investors to conduct thorough due diligence, particularly around redemption and liquidity terms, fee structures and valuation processes,” she said. LTAFs are explicitly built to hold less liquid, longer-dated assets; investors cannot assume daily dealing or seamless exits.
Setting “clear and realistic risk/return expectations, aligned with the underlying strategies of each LTAF,” is essential, she noted. Just as important are the process and frequency of assets being marked transparently and confidence in the “experience and capabilities of the investment teams.”
“Ultimately, education is key,” Gkeka said. “Advisers have a pivotal role to play in guiding investors.”
