UK real estate funds

The last couple of years have seen significant developments for two new types of UK investment fund, both of which are relevant for real estate investment, the Long-Term Asset Fund (LTAF) and the Reserved Investor Fund (RIF).

The long-term asset fund (LTAF) was initially introduced to facilitate investment in illiquid assets by defined contribution (DC) pension schemes. The relevant legislation was introduced in November 2021. The first two LTAFs were approved by FCA in April 2023. There are now more than 30.

There have been some significant milestones in the transition to DC pensions in the last couple of years.

Firstly, the Mansion House Accord, announced in May 2025, is a voluntary commitment by seventeen of the largest workplace pension providers in the UK to invest at least 10% of their defined contribution pension default funds in private markets by 2030, with half of that allocated to the UK. UK real estate will be competing with other investment assets for attention.

Secondly, the Pension Schemes Act 2026 received Royal Assent in April. The most contentious provision is an investment mandation clause designed to provide a backstop to the Mansion House Accord. If the voluntary agreement does not deliver the desired outcome, the government can intervene.

The other key change is the development of the Value for Money Framework. In selecting investment managers, DC schemes will have to look at performance and value for money, rather than just selecting the manager that charges the lowest fees.

In addition to DC pension schemes, certain retail investors may also invest in an LTAF. Although the growth in LTAF assets under management to date has largely been driven by DC investment, distribution to individual investors through private wealth channels is expected to be the big story for the next few years.

There are various legal forms of the LTAF, a Co-ownership Authorised Contractual Scheme (CoACS), Authorised Unit Trust (AUT) or an Open-Ended Investment Company (OEIC). Most of the LTAFs for DC investors have been set up as a CoACS, whereas an OIEC is more suitable for retail distribution. An LTAF in the form of an OIEC may elect for the company, or a cell of the company, to be a Property Authorised Investment Fund (PAIF). This is a tax-exempt fund specifically for investment in real estate. This is an attractive option in the right circumstances.

There are two important points to note:

• An LTAF must be open-ended, with redemptions no more frequently than monthly with at least a 90-day notice period;
• It is a form of Authorised Fund. As such, it is directly regulated by the Financial Conduct Authority (FCA). This makes it relatively expensive to run.

Because of the cost of setting up and running an LTAF, we see them primarily being operated at scale by the larger fund managers. The majority are fund-of-funds investing across a range of private assets.

The reserved investor fund (RIF) came into effect in March 2025. You can find an article with more detail from then on ICAEW’s Construction & Real Estate Community page.

The RIF is a form of contractual scheme, but unlike the LTAF is not an Authorised Fund. The manager of the fund needs to be regulated, but the fund itself is not directly regulated. It is a lower cost and more flexible option than an Authorised Fund.

The RIF may be marketed to:

• Professional investors;
• Large investors, each investing more than £1 million.

The first RIF, the Resonance Housing Pathways Fund, was launched in July 2026. Others are expected to follow, particularly if some of the remaining obstacles are resolved, in particular the VAT treatment of management fees and the anomalies between Stamp Duty Land Tax (SDLT) and Scottish Land and Buildings Transaction Tax (LBTT) / Welsh Land Transaction Tax (LTT).

In September, the Construction & Real Estate Community had a webinar on this topic.