Financial advisers and wealth managers will "need to adapt" to the private markets world that is coming down the line, according to Tim Horne, head of UK defined contribution at Schroders.
In charge of pitching the business's three long-term asset funds, plus other products to clients, Horne says that advisers need to make themselves ready for the new world of private assets, and what that means for managing a client's portfolio.
"As the UK market evolves, when we are talking to wealth managers and investors, they need to adapt to the new reality of private markets. They’re not all ready to set up to do this."
LTAFs were launched three years ago, as a way to allow investment into illiquid assets, such as infrastructure, private equity and real estate, through an open-ended fund but without the liquidity challenges that typically comes with it.
Intended particularly for DC pension funds, they allow fund managers to invest in long-term assets, and require redemptions of no more than a monthly occurrence with 90 days’ notice of doing so.
Last year, LTAFs were opened up to retail investors, and high-net-worth clients, a move that has been embraced by Schroders as it has recently received authorisation for a retail version of the product, which is a feeder fund for a Luxembourg-based LTAF.
Some in the adviser community are concerned that LTAFs would still be completely unsuitable for the retail investor, who may find giving three months' notice to a fund manager far too long.
But Horne disagrees: "The types of clients they're looking at, we're talking higher-net-worth individuals who have a diversified portfolio of liquidity they can source from other areas.
"The LTAF range is under RMMI [restricted mass market investments rules], there's still a suitability requirement that the adviser needs to go through. It's not retail."
LTAFs have received a lot of attention recently due to their role in the government's growth agenda, and the desire to have more pension money invested in 'productive finance', meaning assets that will make a difference to growing the UK economy such as infrastructure and private companies before they get to potential IPO stage.
Schroders has made a big play in this area, having launched the first one in the UK, and now has already three LTAFs, covering renewable energy, climate change and VC investing, in conjunction with the British Business Bank and Phoenix.
Horne says the reason for this is that Schroders wants to get ahead of the market with new products: "We've always thought that private assets should have a role in DC investment strategy – from Schroders' perspective, we have been building a world-class investment capability, but we hadn't brought [the different strategies] together.
"That really changed when we brought everything under the Schroders Capital umbrella [the private markets division], and brought in investment teams to work across asset classes in Schroders Capital".
