Home • Investing Guides • Funds • LTAFs
LTAF Guide: The New Way to Access Illiquid Markets
The basics of LTAFs
Long-Term Asset Funds (LTAFs) are the new kid on the block. First introduced in 2023, they're a type of FCA-regulated investment fund, sitting alongside unit trusts and Investment Trusts. They're open-ended, but only allow periodic contributions and withdrawals. They have been designed to provide a broader set of investors with access to private assets, including private equity, specialist property and infrastructure, which have previously been difficult to access in an open-ended fund because of liquidity constraints.
Historically, the lack of liquidity has made it difficult to hold private assets in an open-ended fund. In an open-ended fund, the investment manager needs to sell holdings to meet redemptions and buy new investments if they have inflows. With illiquid assets, there can be a mismatch between the liquidity provided to investors and the ability to buy and sell the underlying assets.
The most notable example has been the commercial property sector. During periods of dislocation in the commercial property market, funds saw redemptions and couldn’t sell commercial buildings fast enough to meet them. The funds had to close to redemptions altogether. Ultimately, many closed permanently.
To date, the alternative has been Investment Trusts. These have a closed-ended structure, meaning there are no inflows or outflows. Therefore, they provide a better solution to managing illiquid assets. However, because the share price is determined by market demand, rather than by the value of the underlying assets, the shares can trade at a discount or premium. This has been a particular problem for private equity trusts, where discounts have been as wide as 30-40%.
LTAFs are designed to be a hybrid between the two structures. They offer limited liquidity to investors, which is aimed at matching that of the underlying asset. This may be six weeks, quarterly, or whatever is deemed appropriate by the manager. The funds are open-ended, so the price investors receive will match the value of the underlying assets.
How will they work?
LTAFs are open-ended, meaning that they can grow to accommodate new investor demand by issuing new shares, or cancel shares to meet redemptions. The shares in the fund will reflect the value of the fund’s holdings.
Investors will be able to buy into, or sell out of, the fund, in the same way as a normal fund, but at longer intervals than for traditional open-ended funds. Investment managers may hold a portion of the LTAF’s assets in more liquid areas, such as conventional shares or bonds, in order to meet these redemptions, allowing them to leave the portfolio of private assets untouched.
The type of assets will determine how often investors will be able to buy or sell the fund.
The pros of investing in LTAFs
✅ Access new opportunities
Schroders cites UK government data showing there are around 35,900 medium-sized businesses in the UK, yet only about 1,900 are listed on the London Stock Exchange.[1] Many companies are staying private for longer, meaning there’s a growing universe of high-quality businesses that are inaccessible through public markets. LTAFs are designed to open the door to these private companies, as well as infrastructure projects and commercial property, allowing retail investors to access opportunities that were previously out of reach.
✅ Better growth potential
Assets such as private equity often yield higher returns over time compared to public markets. Investors typically engage with companies at earlier stages of their lifecycle, offering greater growth potential. Additionally, assets like infrastructure can provide high, inflation-adjusted dividend streams, making them compelling for those seeking a steady income from their portfolio.
✅ Good for diversification
Private assets may behave differently from public markets, offering a new and diversified source of returns. They can help reduce overall portfolio volatility and provide exposure to sectors or opportunities not available through traditional publicly-listed investments, such as conventional funds and trusts.
The cons of investing in LTAFs
❌ Can be more expensive
Trading typical shares listed on a stock exchange is relatively inexpensive and straightforward. However, buying and selling assets like multi-million-pound buildings, private companies, or infrastructure projects is more complex and therefore costly. LTAFs often incur higher trading costs as a result, which can impact your overall returns.
❌ Valuations not always clear
Conventional exchange-traded products have transparent valuations, but private assets require more complex calculations. Valuations are typically set by independent valuers, drawing reference from similar public companies, recent market transactions, or typical revenue multiples for specific types of businesses. However, these are essentially estimations and this can make LTAF valuations less clear and more subjective.
❌ Ties up your money for longer
Investing in LTAFs often means committing your capital for extended periods of time, thanks to the nature of the underlying holdings. To maintain liquidity, LTAFs may hold cash buffers or siphon off a portion of the portfolio to more easily-traded assets, such as shares. While these buffers ensure that investors can enter and/or exit the fund with greater ease, they also mean that a portion of the fund's capital is not necessarily invested in line with its chief objective.
Are LTAFs right for me?
Top questions on LTAFs
Why should I invest in an LTAF?
The main aim of the LTAF is to bring a broader range of investment opportunities to a wider range of investors. While the investment characteristics of private assets will vary, they may include diversification from equities and bonds, stronger performance, and a new income stream.
A recent survey by the UK Investment Association found that the top motivations for investing in private assets are to protect against inflation eroding the value of savings (76%), portfolio diversification (67%) and superior long-term growth compared to public markets (61%). In addition, a third of investors consider it important to invest directly in infrastructure projects (38%), in physical buildings or real estate (33%) and in young, unlisted businesses (35%) through a Stocks & Shares ISA.
LTAFs offer a breadth of investment options that may not be available through other investment structures. They may be right for you if you are looking for access to private market assets, such as private equity, infrastructure or property, helping to diversify your portfolio and harness new sources of return.
What’s the difference between an LTAF and an Investment Trust?
In simple terms, the difference comes down to structure. LTAFs are open-ended (have an unlimited number of shares), meaning they trade at the value of the underlying assets, but they only open to trade at a fixed number of times per year - this is the limited liquidity we mentioned earlier. On the other hand, Investment Trusts are closed-ended (have a finite number of shares) and trade regularly on an exchange, but can be subject to premiums and discounts to the NAV according to investor demand.
Why should I choose an LTAF over an Investment Trust?
An LTAF will trade at the value of the underlying assets, whereas an Investment Trust is exchange-traded and therefore may trade at a discount or premium.
Can I invest in LTAFs with an ISA?
The UK government has confirmed that LTAFs will be eligible for inclusion in Stocks & Shares ISAs from 6 April 2026. Investment Association research showed there is already plenty of appetite - 57% of UK investors would consider investing in illiquid assets through Long-Term Asset Funds, and appetite is particularly strong among younger investors.[2]
What do the experts think of LTAFs?
The LTAF structure has been welcomed by industry participants, saying it provides a new tool for investors.
While the LTAF market remains relatively immature, currently offering over 20 strategies in the UK, its potential for diversification and access to higher returns makes it an attractive proposition for investors. We expect continued growth in this space.
That said, it is paramount for investors to conduct thorough due diligence, particularly around redemption and liquidity terms, fee structures and valuation processes. Clear and realistic risk/return expectations, aligned with the underlying strategies of each LTAF, are important, while transparency and confidence in the experience and capabilities of the investment teams are also vital.
Many of the most compelling investment opportunities today lie outside listed markets, and this change allows retail investors to access these in a tax-efficient manner.
However, despite the headline announcement, two significant barriers remain to be cleared before these funds become mainstream. Firstly, availability is limited. Few leading global managers have launched LTAFs, with many preferring to target SICAVs - the European equivalent - where the addressable market is bigger. Unfortunately, SICAVs are not eligible for ISAs, even though they are in essence exactly the same thing.
Secondly, operational constraints among ISA providers pose a real challenge. Most major investment platforms are set up to accommodate daily-dealing funds, whereas LTAFs, by design, are long-term and relatively illiquid, typically offering monthly or quarterly liquidity. Updating infrastructure to support such funds is complex, time-consuming, and costly.
How do I choose the right LTAF?
The right LTAF will depend on your investment goals and existing investments. You will need to assess the type of risk profile offered by the underlying assets and the type of return you can expect.
Key takeaways
🔓 Easier access to illiquid assets
LTAFs are designed to let investors put money into assets that aren’t easy to buy or sell quickly. This includes things like private equity, infrastructure projects, and commercial property. Traditionally, these investments were only open to large institutions because of their complexity, high minimum investment sizes, and the difficulty of exiting quickly.
📆 Designed for longer-term investing
They're designed for longer-term investing because the assets they hold can take years to generate returns and aren’t easily sold on short notice. This long-term approach benefits investors by giving them access to assets that historically offer higher returns or diversification compared with more liquid markets, while also helping fund managers plan and manage investments more efficiently.
🏁 Eligible for ISAs from 2026
From 6 April 2026, LTAFs will be eligible for inclusion in Stocks & Shares ISAs. Investors will be able to benefit from tax-free growth and withdrawals, enhancing the appeal of these new funds for more confident investors with long-term savings goals.
---
