New Fund Structures for Alternatives: The LTAF and ELTIF

Alternative investments — private equity, venture capital, real estate, infrastructure, private credit — have historically been the preserve of institutional investors and the very wealthy. The fund structures used to package these assets, most commonly Alternative Investment Funds (AIFs), were designed with professional investors in mind: high minimum commitments, long lock-up periods, and complex legal documentation.

But the investment landscape is shifting. Capital needs to be channelled into the defining challenges of our time — building sufficient housing, upgrading infrastructure, funding innovation, and financing the transition to renewable energy. At the same time, individual investors are increasingly seeking diversification beyond public markets that are dominated by a shrinking number of mega-cap stocks.

Two new fund structures have emerged to address this gap: the European Long-Term Investment Fund (ELTIF) and the UK's Long-Term Asset Fund (LTAF). Both aim to create regulated, accessible vehicles that can channel retail and institutional capital into long-term, illiquid assets — while maintaining appropriate investor protections.

This article provides an overview of both structures, why they were created, and what they mean for investors looking to access alternative asset classes.

To understand why the LTAF and ELTIF matter, it helps to understand what came before them.

Alternative investments have traditionally been packaged in structures designed for professional and institutional investors:

• Alternative Investment Funds (AIFs) — The primary vehicle for alternatives across Europe. AIFs are regulated under the Alternative Investment Fund Managers Directive (AIFMD) but are generally restricted to professional investors, with high minimum investments (typically €100,000 or more).
• Unregulated Collective Investment Schemes (UCIS) — In the UK, these are funds that fall outside the standard FCA authorisation framework. They can invest in a wide range of assets but cannot be promoted to retail investors due to their higher risk profile.
• Non-Mainstream Pooled Investments (NMPIs) — The FCA's classification for investment products that don't meet the criteria for standard retail funds. Marketing restrictions limit their distribution to sophisticated or high-net-worth investors.

The rationale for these restrictions is consumer protection. Long-term, illiquid investments that are not traded on an exchange require patience and the ability to withstand periods without access to capital. Regulators have historically concluded that most retail investors are not suited to these characteristics.

By contrast, UCITS (Undertakings for Collective Investment in Transferable Securities) — which include most ETFs and open-ended funds — are the standard retail investment vehicle across Europe. They provide daily liquidity, strict diversification rules, and strong investor protections, but are limited to listed securities such as bonds, equities, and money market instruments. UCITS cannot meaningfully invest in private markets.

The result has been a clear divide: retail investors access public markets through UCITS; alternatives remain behind a professional-investor gate.

Several structural trends are driving regulators and asset managers to reconsider this divide:

The Shrinking Public Market

The number of publicly listed companies has declined significantly over the past two decades. In the US, the number of listed firms has fallen from over 8,000 in the late 1990s to fewer than 4,000 today. In the UK, the London Stock Exchange has seen a steady stream of delistings. Meanwhile, public indices are increasingly concentrated — the top 10 stocks in the S&P 500 now represent over 35% of the index.

For investors relying solely on public markets, this means less diversification and exposure to a narrowing slice of the economy. Many of the fastest-growing companies now remain private for longer — or indefinitely.

Capital Formation Needs

The global economy faces enormous capital requirements. The UK alone needs an estimated £40 billion annually in additional infrastructure investment. The energy transition requires trillions in renewable energy financing globally. Housing shortages across Europe and the UK demand sustained private capital deployment.

Channelling a portion of retail savings into these productive assets benefits both investors (through diversification and potential returns) and the broader economy.

The Democratic Investing Thesis

There is a growing recognition that limiting access to an entire asset class based solely on investor classification creates an uneven playing field. High-net-worth individuals and institutions have historically earned a "liquidity premium" — higher returns in exchange for accepting illiquidity — that retail investors have been unable to access. New fund structures aim to level this playing field while maintaining appropriate safeguards.

The European Long-Term Investment Fund (ELTIF) is an EU-regulated fund structure designed to channel capital into long-term investments in the real economy. First introduced through EU Regulation 2015/760, the ELTIF is not a legal form in itself — it is a label that can be applied to qualifying AIFs that meet specific criteria regarding eligible assets, diversification, and investor protections.

Key Characteristics

• Eligible assets: ELTIFs must invest primarily in qualifying long-term assets, including unlisted companies, real assets (infrastructure, real estate), and other long-term investments.
• EU-wide passport: Unlike standard AIFs, ELTIFs can be marketed across all EU member states to both professional and retail investors using a single authorisation.
• Domiciliation: Most ELTIFs are domiciled in Luxembourg, leveraging the country's established fund administration infrastructure.
• Closed-ended structure: Originally, ELTIFs were required to be closed-ended, meaning investors committed capital for the life of the fund with no early redemption.

Why Adoption Was Initially Low

Despite the regulatory framework being in place since 2015, adoption was extremely limited. By 2023, fewer than 100 ELTIFs had been launched across the entire EU — a fraction of the thousands of UCITS available. The reasons included overly restrictive eligible asset definitions, a mandatory €10,000 minimum investment for retail investors, rigid diversification rules, and the lack of any liquidity mechanism for early exit.

This led to a comprehensive overhaul: ELTIF 2.0, which came into force in January 2024 and is covered in detail in our ELTIF deep dive.

The Long-Term Asset Fund (LTAF) is the UK's own fund structure for long-term, illiquid investments. Legislation was laid in July 2023, and in January 2024 the UK formally repealed its domestic ELTIF legislation, signalling a clear preference for the LTAF framework over the EU equivalent.

The LTAF sits within the FCA's existing COLL (Collective Investment Schemes) sourcebook and is designed as an authorised open-ended fund with specific features suited to illiquid assets.

Key Features

• Minimum 50% illiquid allocation: At least half of the fund's assets must be invested in long-term, illiquid assets.
• Eligible asset types: Private equity, venture capital, private credit, real estate, infrastructure, forestry, and precious metals — either through direct holdings or indirect exposure.
• Prudent spread of risk: The FCA requires LTAFs to maintain appropriate diversification, though the rules are more flexible than those governing UCITS.
• Liquidity management: LTAFs must deal at least monthly (or quarterly for retail-accessible versions) with a minimum 90-day notice period for redemptions in retail-accessible funds.
• FCA distribution reforms: Recent FCA rule changes have widened the distribution channels for LTAFs, including access through advised channels and defined contribution (DC) pension schemes.

The LTAF represents a significant development for UK investors. It provides a regulated, transparent structure for accessing alternative assets — without requiring the high minimums or professional investor status that traditional vehicles demand.

For a detailed examination of the LTAF's regulatory framework, liquidity mechanisms, and current market landscape, see our LTAF deep dive.

While both structures share the goal of broadening access to alternatives, they differ in important ways:

Feature	ELTIF 2.0	LTAF
Jurisdiction	EU / EEA	United Kingdom
Regulatory basis	EU Regulation 2015/760 (as amended 2024)	FCA COLL sourcebook
Legal form	Label applied to qualifying AIFs	Authorised open-ended fund
Minimum investment (retail)	None (removed under 2.0)	None specified
Eligible assets	Unlisted companies, real assets, qualifying investments	PE, VC, private credit, real estate, infrastructure, forestry, precious metals
Illiquid allocation minimum	No fixed minimum (diversification rules apply)	50% of fund value
Liquidity	Redemption windows, matching mechanisms (fund-specific)	Monthly/quarterly dealing, 90-day notice (retail)
Cross-border marketing	EU passport to all member states	UK only (NPPR for non-UK funds)
Retail access	Yes, with suitability assessment	Yes, via advised channels and DC pensions

The two structures are not in competition — they serve different markets. However, asset managers operating across both jurisdictions may choose to launch parallel vehicles, and some convergence in standards is expected over time.

The emergence of ELTIFs and LTAFs represents a meaningful shift in how individual investors can access alternative investments. Here are the practical implications:

Growing Product Availability

Major asset managers — including Blackstone, Schroders, Fidelity, and abrdn — have already launched or announced LTAF and ELTIF products. As the regulatory frameworks mature, expect a growing range of strategies covering private equity, infrastructure, real estate, and multi-asset alternatives.

Lower Barriers to Entry

The removal of minimum investment thresholds (ELTIF 2.0) and the creation of advised distribution channels (LTAF) mean that investors who previously could not access alternatives now have a viable path. This is particularly significant for UK defined contribution pension savers, who may gain exposure to alternatives through their workplace schemes.

Important Considerations

These structures do not eliminate the fundamental characteristics of alternative investments. Investors should still consider:

• Liquidity constraints: Even with redemption mechanisms, these are not daily-dealing funds. Capital may be locked for months or longer.
• Valuation complexity: Unlisted assets are valued less frequently and with more uncertainty than public securities.
• Fee structures: Alternative fund fees are typically higher than those of passive UCITS products, reflecting the active management and due diligence involved.
• Suitability: Not all investors will benefit from alternatives. A long time horizon and tolerance for illiquidity are essential.

The LTAF and ELTIF are tools — and like any investment tool, their value depends on how they are used. For investors with appropriate time horizons and risk tolerance, they open doors that were previously closed.

For detailed analysis of each structure, see our deep dives on the ELTIF and the LTAF.