More than three quarters (78 per cent) of asset managers in the UK and US with a presence in Europe are considering launching a Long-Term Asset Fund (LTAF) amid increased investor demand for private markets access.

The research from Carne Group found that LTAFs and European Long-Term Investment Funds (ELTIF) were set to drive “significant inflows” into private markets, with 88 per cent of wealth managers expecting increased participation in private markets over the next three years.

Carne Group stated that the growing demand for private markets was being driven by LTAF/ELTIF opportunities and increasing appetite for illiquid investments among wealth managers, who expected private markets to account for 11 per cent of their assets under management by 2030, up from 5 per cent in 2021.

However, while the “vast majority” of wealth managers intended to use LTAFs and ELTIFs in the next three years, only 24 per cent already had access to private markets through an LTAF or ELTIF.

To capitalise on this growing investor base, 82 per cent of UK asset managers were considering launching an LTAF, and 28 per cent were looking into ETLIFs, while 74 per cent of US asset managers who had a presence in Europe were exploring LTAFs and 42 per cent were considering ELTIFs.

While LTAFs were becoming more popular, Carne Group warned that a number of “significant challenges” remained for investment managers intending to bring such products to market, particularly regulatory complexity.

Asset managers identified regulation as a key obstacle for successful European fundraising, and were therefore increasingly turning to third-party specialists for support in launching and raising funds in Europe.

The majority (87 per cent) of asset managers expected to increase their use of outsourcing over the next five years, citing a combination of motivations including reducing regulatory risk, achieving greater speed to market, and improving transparency for reporting.

“For wealth managers and defined contribution (DC) pensions schemes, the LTAF and ELTIF serve as critical routes into illiquid asset classes and will catalyse the growth of private markets,” commented Carne Group managing director, Jeremy Soutter.

“Launching LTAFs or ELTIFs in a time-efficient manner will be critical for asset managers looking to capitalise on the private market opportunity.

“Equally, some asset managers may need to assess if an LTAF or ELTIF is indeed necessary. Launching an LTAF can be a complicated, lengthy and costly process – made all the more difficult by the competitive pressure to get to market quickly, a challenging commercial backdrop in which cost-effectiveness is key, and an increasingly complex regulatory agenda both in the UK and EU.

“Carne is therefore witnessing a significant number of asset managers turn to third party specialists to steer LTAFs through the regulatory process and enable speed to market.”

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