· Strong governance
o Valuation processes of the Authorised Fund Manager or rationale for a 3rd party valuer
o Annual report of an LTAF to include certain additional information on best interest,
o How the manager manages the liquidity and conflicts of interest in the best interest of the fund- responsibility for this to be allocated to an Approved Person
· Clear Disclosure
o Clear information on the LTAF and associated risks
o No specific additional disclosure intended where the LTAF makes claims of being sustainable, responsible or delivering impact
· Purpose of the Fund
o Investment strategy of the LTAF to be defined to invest in mainly assets (i.e. at least 50%) which are long-term and illiquid in nature, or in other collective investment schemes (CIS) which invest in such assets
· Investment Powers
o Investment powers to be based on existing rules for Qualified Investor Schemes (QIS)- (investment in specified investments under the RAO, as well as immovable assets and commodities)
o LTAF to have a prudent spread of risk and appropriate diversification- a period of 24 months is proposed to achieve a prudent spread of risk
o Proposal to permit LTAF’s to invest in loans and direct lending, such as part of a lending syndicate, as part of a diversified portfolio of investments.
o LTAF’s will be subject to rules of Assessment of Value
o Principle to be set that the manager should take reasonable steps to ensure that the scheme does not indirectly invest in itself.
o LTAF maximum borrowing level to be set at 30% of net assets
o Manager will have to consider the extent to which the borrowing is consistent with the liquidity profile of the investments and redemption policy of the fund.
o Current FUND 3.9 cover valuation rules in the AIFMD when valuing fund assets
o Proposal is to require the manager to appoint an external valuer unless it can demonstrate that it has the competence and experience to value assets of the type in which the LTAF invests.
o Depositary is responsible for taking reasonable steps to ensure that the scheme is managed in accordance with the rules on valuation. The depositary is required to assess the managers competence to value the schemes assets when the fund applies for authorisation and on an ongoing basis
· Redemptions and subscriptions
o LTAFs are not expected to offer daily dealing but must consider a wider range of liquidity management tools, including notice periods and to disclose their use in the prospectus.
o Suspension should not be used as a means of liquidity management
o Manager of an LTAF will be subject to Articles 46-49 of the AIFM delegated regulation
· Investment Due Diligence
o Managers must undertake due diligence on their investments in line with good practice and to disclose in the prospectus how they do this.
· Knowledge, skills and experience
o Full scope UK AIFM can manage a LTAF
o Evidence of competence, under Article 21 AIFMD must be demonstrated during the authorisation process
· Disclosure of charges
o Disclosure of charging to be made to reflect the complexity in some illiquid strategies and therefore associated costs may differ. LTAFs to disclose examples of how performance fees will operate (equivalent to the requirement for UCITS and NURS in COLL 4.2.5R(13)
o Additional requirement proposed for fund managers of LTAFs to assess and publicly report on:
§ Valuation of investments
§ Due diligence
§ Conflicts of interest
§ Liquidity management
o LTAF manager should produce a report, as part of the annual report, similar to the Assessment of Value reports explaining how the additional requirements have been satisfied