The FCA is consulting on new guidelines which might prolong FSCS safety to retail buyers investing in Lengthy Time period Asset Funds (LTAFs).
The potential adjustments are a part of a transfer by the FCA to make LTAFs extra client pleasant – and to encourage retail buyers to trust in investing in them.
The proposed guidelines would give retail buyers and extra outlined contribution pension schemes entry to Lengthy Time period Asset Funds (LTAF).
The LTAF car was launched in 2021 to encourage extra investments in long-term, illiquid belongings, resembling enterprise capital, personal fairness and personal debt, actual property and infrastructure.
To date few companies have supplied them with Schroders among the many first to launch one earlier this yr.
The FCA says that LTAFs are a better danger product that may assist present larger diversification to funding portfolios in alternate for probably larger returns however much less fast liquidity and longer redemption durations.
Extra protections underneath the FSCS ought to increase client confidence, the FCA says.
LTAFs can even be topic to further protections underneath the FCA’s excessive danger funding framework, together with danger warnings and buyer assessments.
The FCA says it’s searching for views on whether or not the protections of the Monetary Providers Compensation Scheme needs to be accessible for LTAFS, or whether or not a distinct method needs to be in place, earlier than LTAFs get to the retail market.
Sarah Pritchard, government director, markets, stated: “Longer-term much less liquid actual belongings can generate good various returns for buyers and, crucially, assist to develop the UK economic system via investments, resembling new infrastructure.
“Our new guidelines permit retail buyers, and pension funds, to put money into productive finance, however in addition they recognise that long-term investments may be riskier. That’s the reason folks might be given clear danger warnings and buyer assessments, in step with different larger danger merchandise.”