More than half (57%) of UK investors would consider investing in a long-term asset fund, following an announcement by the Chancellor that LTAFs will be included in stocks and shares ISAs from next year.
Unlike traditional funds, LTAFs invest in illiquid assets such as infrastructure, commercial property and private equity.
A survey by the Investment Association found over three quarters of Millennials (77%) and 70% of Gen Z would consider investing through the product, while 41% of baby boomers said the same.
In addition, 80% of Millennials would be comfortable tying their money up for longer periods of time if it meant they could generate higher returns. However, this number falls to just 65% of baby boomers, suggesting that LTAFs may appeal more to younger investors with longer-term horizons.
According to the Investment Association, protecting against inflation eroding the value of savings was the top motivation for investing in private assets (76%). This was followed by 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 and shares ISA.
However, the Investment Association said LTAFs must come with “clear, consistent and transparent” disclosures on risk and liquidity. Almost two thirds of investors would be more likely to invest in an LTAF if they knew how long withdrawals would take (65%), whilst just over two thirds (69%) would be more likely to do so if they clearly understood how their money would be managed.
Furthermore, the research showed that 74% would only commit money to an illiquid fund like an LTAF if they first had a readily accessible cash or liquid savings buffer for emergencies.
Chris Cummings, CEO of the Investment Association, said: “Broadening retail investor access to private markets has the potential to both increase individual returns for savers and drive economic growth.
“We have long called for Long-Term Asset Funds to be incorporated into stocks and shares ISAs, and our latest research shows just how transformative this could be.
“The research findings highlight a cautious but growing optimism among UK retail investors towards new investment frontiers. Younger investors in particular value the idea of “going long and going local,” provided the investment opportunities are attractive and fit their financial goals.”
Cummings said that going forward, educating investors on how vehicles like LTAFs work, including the trade-offs of liquidity versus returns, will be crucial to build trust and uptake.
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