Unlocking private capital for retail investors

Private assets deserve retail investors’ attention and retail investors deserve access. More than 80% of the global economy is driven by privately held companies, yet retail investors have largely been left out.

To put it into perspective, the combined capital of private wealth is equal to that of all pension and institutional money worldwide. However, half of this capital is effectively sidelined, unable to invest in the companies that make up the bulk of the economy.¹

This is a significant, untapped opportunity – not only for retail investors but for economic development.

Why private assets should be on retail investors’ radar

Fast-growing companies – particularly those driving innovation and addressing ESG challenges – are often privately held, accessible primarily to institutional and, to some extent, ultra-high-net-worth investors (UHNWIs) through private asset funds.

These companies present higher risks, but also offer the potential for outsized returns. In addition to their growth potential, private assets often provide a complexity premium (higher returns due to fewer investors for complex assets) and an illiquidity premium (extra yield for less liquid investments).

Adding private assets to a portfolio may also enhance diversification, reducing overall volatility and downside risk.

Why haven’t retail investors gained access to private assets?

While some family offices and UHNWIs have allocations to private assets, retail investors have almost no exposure. There are a few reasons for this: regulatory barriers, lack of knowledge and understanding of private markets’ risks and rewards, and current investment structures being tailored to large institutional investors.

For example, retail investors may typically want some liquidity in their long-term investments, but traditional private-asset funds, which are closed-ended, fail to offer this flexibility. Minimum investment amounts and unpredictable capital calls (the need to contribute additional capital at short notice) have also discouraged retail participation.

Ultimately, for retail investors, private assets are inherently more complex, require higher minimum investments, and are accessible only through assets managers due to their private nature, with sourcing often based on capacities, trust and established relations.

How can this change?

Regulations and fund structures are changing favorably. The private capital landscape is evolving, with new regulations and fund structures paving the way for individual investors. A significant development is the relaunch of the EU’s European Long-Term Investment Funds (ELTIFs). ELTIF 2.0, effective as of January 2024, offers retail investors large-scale access to private markets for the first time.

Initially launched in 2015, ELTIFs aimed to finance long-term projects and small-to-medium enterprises (SMEs) using non-institutional capital, but they struggled to gain traction, raising less than €10bn to date from individual investors and marketing in just a handful of EU countries. In particular, the requirement for ELTIFs to be closed-ended without any exit, even in exceptional circumstances, combined with harsh guidelines, made them fail their initial target.

ELTIF 2.0 addresses previous limitations, such as high investment thresholds and strict liquidity restrictions. The new framework eliminates the €10,000 minimum and lifts the 10% cap on exposure for investors with less than €500,000 in financial assets, making private assets more accessible than ever.

The new ELTIF regime allows for the launch of evergreen funds. Unlike traditional closed-end private asset vehicles, evergreen funds have more liquidity windows and regularly updated NAVs, meaning investors have frequent opportunities to invest and withdraw money – similar to UCITS funds retail investors are familiar with.

With an evergreen fund, investors’ capital is at work from day one, without having to wait for capital calls. Track record and historical performance are also easier to read, which is important for investors seeking both education and simplicity.

Asset managers need to simplify processes for retail investors

To succeed in engaging retail investors, asset managers must aim to provide a seamless, UCITS-like experience, making investing in private assets as straightforward as possible. Investors should be able to simply pay cash and gain exposure to private assets immediately, with asset managers handling complexities like deployment, cash drag, liquidity, and flow management behind the scenes. This requires them to leverage their expertise, access transactions (buy or sale), modeling capabilities and to move from a closed-ended management style which is mostly about originating and selecting deals to a broader perspective which includes diversifying vintages and durations.

Retail investors value diversification in one place

Retail investors expect access to a range of private asset types and strategies to diversify their allocations. As the retail segment becomes a significant force in private markets, firms that can offer a variety of strategies – ranging from private equity to real estate to infrastructure – will stand out.

Success in this space requires technical excellence in each of the asset classes, access to top-tier opportunities, a network of trusted partners and providers and the ability to structure and model portfolios with the right cash flow and liquidity profiles – all while navigating complex tax, legal, and regulatory environments.

Next wave is on the horizon

The rise of private capital allocations by UHNWIs in recent years is just the beginning. In the next five years, we expect mass retail investors to become a more and more important driver. The future of private capital is wide open for retail investors, and we believe the time to seize the opportunity is now.

_{1 Source: Preqin, Bain analysis, 2024}

About
Nicolas Audhoui-Darthenay joined Natixis Investment Managers in 2021. He was previously Head of Structured Solutions at Younited Credit, in charge of innovative financing, and Head of Structuring for Securitised & Structured Assets for five years at AXA IM Structured Finance, where he was leading the effort on new products and complex structures. Prior to that, he spent nine years as a senior structurer at Merrill Lynch and Deutsche Bank in London, where he focused on synthetic CDOs, ABS, repacks, credit index options and regulatory capital solutions for banks and insurance companies.

_{Any securities mentioned above are for illustrative purposes only and do not constitute advice, a recommendation, or a solicitation to buy or sell. All opinions are those of the author at the time of publication and are subject to change. Past performance is not a guarantee of future returns.}

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_{This article originally appeared in Alternatives in 2025. The opinions and facts included in the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin and Natixis Investment Managers accept no liability for any decisions taken in relation to the above.}