Private markets prepare for the rise of the retail investor

Retail investors, primarily high-net-worth individuals, are piling into alternative investments—real estate, private equity, venture capital, and credit funds, among others. Fund managers, eager to get their hands (and funds) around the $7 trillion estimated to flow from these new entrants, are changing their offerings and operations to accommodate them.1 In its recent custom report developed in collaboration with PitchBook, Juniper Square details the dynamics behind this trend and its impact on fund managers.

Private markets—that is, all alternatives—are forecast to reach $60 trillion in value by 2032, more than twice their 2022 level of $25 trillion. Because traditional institutional investors have essentially achieved their target allocations in these assets, much of this growth is anticipated to come from retail investors. These range from high-net-worth-individuals (HNWI) to more mainstream investors, who are expected to gain greater access to private options as regulations are relaxed.

The strong and consistent performance of alternatives during the 2015-2020 period attracted retail investor interest. This interest grew during the pandemic, as individuals looked for higher returns on their COVID-era cash than that readily available in the zero-interest-rate environment.

Finally, alternatives offered greater exposure to high-growth companies, which have been staying private longer. Many individual investors already have substantial exposure to public markets—by 2022, 21% of U.S. families held public equities, up 38% from 2019.2 But individual investors are more likely to use advisers when building their portfolios: 70% of high net-worth individuals without positions in alternatives said they would invest in those assets if their financial advisers approved—and 72% of advisers would indeed do so.3

Some members of the adviser community, however, feel uncertain about recommending alternatives to their clients. Blackstone recognized this gap early and undertook an extensive education campaign to familiarize them with the asset class. Joan Solotar, Global Head of Blackstone’s Private Wealth Solutions, explained: "The education lift is significant. The majority of advisers across the U.S. and certainly around the world have still never allocated any of their client assets to privates."

Fund managers (GPs) face a number of challenges in accommodating individual investors. Among them are the need for education, more flexible investment vehicles, streamlined paperwork and back-office functions, and more transparent reporting.

Michael Episcope, co-founder and co-CEO of Origin Investments, an asset management fund that specializes in providing alternatives to individuals, explained his firm’s education efforts, saying, “Not one of our investors has invested with us without at least a 30-minute-long call with someone from our team to talk through the details of the funds and how we operate. The last thing we want is someone investing in an asset [when] we haven’t set expectations about our responsibilities and deliverables.”

Along with educational efforts, many GPs have welcomed individuals by creating vehicles with more flexible liquidity schedules to meet their needs. For instance, evergreen and interval funds allow investors to redeem their shares, sometimes as often as quarterly. Open-ended funds can offer higher returns due to a more immediate investment schedule.

Publicly listed firms such as Blackstone, KKR, and Apollo, as well as private ones like Origin, have introduced open-ended fund options that address a number of different asset classes. Blackstone’s Solotar explained, “I think the path of travel is towards open-ended [funds] because your money is invested right away. Some individuals prefer drawdown funds to manage their own liquidity… if you are a private equity investor looking for that high-teens return, a 10-year fund will probably double your money. But if you’re an open-ended investor and that fund achieves just 12 percent net over 10 years, you will triple your money because the money’s in the ground from day one.”

Beyond new vehicles, GPs have adapted and transformed their internal processes to meet the expectations of new, digitally native investors. Retail investors, used to the user-friendly and flexible websites offered by public market platforms like Robinhood and Betterment, are forcing GPs to update these processes and improve their infrastructure, providing investors with more timely reports and control of their positions. As a result, VC firms have invested more than $40 billion in wealthtech-focused startups since 2020.

“We are entering what will be the golden age of private markets,” said KKR’s Alisa Wood, head of KKR’s private equity wealth practice, about the coming wave of retail investors.4 Trillions of dollars are poised to enter private markets, much of it from individuals diversifying their holdings to access the returns they’ve watched institutions reap.

To attract retail investors, GPs will need to innovate actively. Along with designing flexible investment vehicles such as open-ended interval or evergreen funds, GPs must streamline their firms’ operations. Subscribing and onboarding, portfolio management and reporting, and fund administration details must change to provide greater ease of use, speed, and transparency for the new investors.

1 “Pulse Check:2024 Outlook,” Blue Owl Capital, July 2024, https://docs.blueowl.com/DrPMFHXkrcM, p. 14.
2 “Changes in U.S. Family Finances From 2019 to 2022,” Board of Governors of the Federal Reserve System, October 2023, p. 21, https://www.federalreserve.gov/publications/files/scf23.pdf.
3“Brookfield Oaktree Wealth Solutions Survey Highlights Investor Demand for Alternative Investments and Critical Role of Financial Advisors,” GlobeNewswire, Brookfield Asset Management, October 8, 2024.
4 Jack Sidders and Kriti Gupta, “KKR Eyes $190 Trillion of wealth in private markets,” Bloomberg.com, January 29, 2025, https://www.bloomberg.com/news/articles/2025-01-29/kkr-eyes-190-trillion-of-wealth-in-private-markets-golden-age.