The U.K.'s Financial Conduct Authority has broadened access to new illiquid funds known as Long-Term Asset Funds to include some defined contribution plans and retail investors.
LTAFs are open-end vehicles for investing in long-term, illiquid assets, such as venture capital, private equity, private debt, real estate and infrastructure.
The change means that self-select options of defined contribution plans can adopt LTAFs in addition to the default options.
"Our new rules allow retail investors, and pension funds, to invest in productive finance, but they also recognize that long-term investments can be riskier," said Sarah Pritchard, executive director, markets, in a news release. "That is why people will be given clear risk warnings and customer assessments, in line with other higher risk products."
Chris Cummings, CEO of the Investment Association, which represents money management firms that manage £10 trillion ($12.71 trillion), welcomed the change.
"This is an important step forward in broadening access to less liquid assets which can provide a valuable source of long-term returns for investors, enabling them to diversify their portfolios and achieve their financial goals," Mr. Cummings said in an emailed comment. "These investments in turn provide a valuable source of capital for the U.K. economy, funding infrastructure projects and powering long-term economic growth."
Ben Leach, senior director, investments at Willis Towers Watson, said it remains to be seen whether the change will lead to a greater adoption of LTAFs by DC plans because the majority of defined contribution assets are invested in default options.
