The Financial Conduct Authority confirmed in a policy statement today that Long Term Asset Funds (LTAFs) will be covered by the Financial Services Compensation Scheme.

The changes are part of a move by the FCA to make LTAFs more consumer friendly and to encourage retail investors to have confidence in investing in them.

It announced in June that it was consulting on new rules which would extend FSCS protection to retail investors investing in LTAFs.

It has set out new rules, “to enable a broader range of retail investors and pension schemes to appropriately access Long-Term Asset Funds (LTAFs) whilst ensuring understanding of the risks involved.”

The LTAF vehicle was introduced in 2021 by the Government to encourage more investment in long-term, illiquid assets, such as venture capital, private equity and private debt, real estate and infrastructure.

So far few firms have offered them with Schroders among the first to launch one earlier this year. The Schroders Capital Climate+ LTAF, launched in March, is a diversified multi-private assets fund which aims to support the transition towards net zero economies through its investments.

In response to the expansion of who could access LTAFs, the FCA consulted on whether the protection of the FSCS should be available for the funds.

The consultation closed on 10 August and the FCA said it received a total of 17 responses from: three private individuals, three firms, seven trade bodies, one law firm, two FCA panels, and the FSCS.

The full list of respondents was:

• Association of British Insurers (ABI)
• Association of Investment Companies (AIC)
• Association of Pension Lawyers (APL)
• Association of Real Estate Funds (AREF)
• BlackRock
• Consumer Panel
• Depositary & Trustee Association (DATA)
• Financial Services Compensation Scheme (FSCS)
• Hargreaves Lansdown
• Investment Association (IA)
• Lane Clark & Peacock LLP
• Michael Crofts
• Personal Investment Management & Financial Advice Association (PIMFA)
• Practitioner Panel
• Roger Lawson
• Schroders
• Scott Huggins

All but one of the respondents expressed "significant concerns" about the absence of compensation protection from the open-ended funds.

The FCA said: "We have considered the position carefully and reflected on the feedback received. In light of this, we have decided not to take forward the option to exclude FSCS cover for regulated activities relating to LTAFs.

"We now propose to consider any changes to the scope of FSCS protection for retail investments in the round, rather than excluding activities relating to certain investment products in isolation."

• FS23/7: Long-Term Asset Funds (LTAFs) – Financial Services Compensation Scheme Coverage Feedback Statement