Transforming Scotland into a premier investment destination
Recent developments the regulatory landscape present opportunities for Scotland. The introduction of Long Term Asset Funds (LTAFs) marks a significant shift. Designed for investments in long-term illiquid assets such as private equity, venture capital, real estate and infrastructure, LTAFs offer an alternative for those with extended investment horizons capable of shouldering associated risks, primarily aimed at defined contribution pension schemes.
With a broader scope of permitted investors, including professional and sophisticated retail investors, LTAFs stipulate a minimum of 50% of their assets be illiquid, such as real estate and commodities. However, LTAFs come with regulations: they require a prospectus outlining investment strategy, terms and fees, and they afford greater investor protection with redemption restrictions, aligning with the liquidity of underlying assets.
Financial promotion laws require any investment invitation be clear, fair and not misleading. The recent regulatory "gateway" for firms endorsing financial promotions means only those with a specific FCA-granted permission may approve promotions by unauthorised entities. Cryptoassets now fall under these restrictions and, with social media's burgeoning role in investment promotion, the FCA has issued fresh guidance to ensure proper communication of risks, especially by influencers.
Adjustments to financial promotion exemptions have lowered thresholds to previous levels, reversing changes which had only come into effect weeks earlier after concerns that they may impact the ability of start-up businesses to obtain investment and raise finance through small-scale investors.
There is hope in the investment trust industry that progress will be made soon on costs disclosures, following widescale lobbying on this point. In March, more than 100 investment company managers and directors wrote to the Chancellor demanding the urgent removal of the EU retail product cost disclosure rules which it is argued are making investment trusts look expensive compared to open-ended products.
These regulatory changes, along with a consumer duty that mandates firms to act in good faith, avoid harm and support customer financial objectives, as well as the introduction of standardised ESG sustainability labels, signal a commitment to transparency and customer protection that could strongly position Scotland in attracting discerning investors.
But what more can be done?
Scotland has a solid foundation in industries such as renewable energy, technology and life sciences. To elevate our status on the global stage, we need a concerted effort to drive innovation within these sectors. This means investing in research and development, fostering partnerships between academia and industry, and supporting the commercialisation of new and groundbreaking ideas. By doing so, Scotland can become synonymous with cutting-edge innovation.
While Scotland is already a successful hotbed of start-up activity, there is room for improvement. Entrepreneurs need easier access to capital, mentorship and a regulatory environment that encourages rather than hinders innovation. Simplifying the start-up and scale-up processes will catalyse the creation of innovative businesses, driving economic growth and attracting international investment.
Additionally, sustainability should be at the core of our investment strategy. Our goal of achieving carbon neutrality by 2045 is ambitious, but it is also a powerful draw for investors focused on green and sustainable projects. Scotland's commitment to sustainability can set it apart in the global market, attracting investment that aligns with our values and long-term vision.
Finally, to draw investors' eyes towards Scotland, we must offer compelling financial incentives. These incentives should be designed to lower the entry barrier for companies looking to invest in Scotland, making it easier and more financially viable for them to do so.