By Philitsa Hanson, Global Head of Product – Equity and Fund Admin, Allvue Systems
Growing demand for access to private assets is driving record inflows into evergreen and semi-liquid funds. According to S&P Global, private markets are expected to surpass $15 trillion by 2025 and exceed $18 trillion by 2027. However, growing interest from global retail investors is beginning to expose infrastructure gaps across the sector.
Industry groups have recently flagged concerns around increasing mis-selling risks, particularly when intermediaries lack the expertise to explain liquidity constraints and valuation complexities to retail investors. While hard data remains limited, anecdotal commentary and emerging warning signs suggest that some private funds may face challenges in fundraising when investors question liquidity or valuation assumptions is scarce, anecdotal commentary and emerging warning signs suggest that some private funds may struggle to close when retail channels doubt liquidity or valuation assumptions.
Retail inflows demand retail-ready infrastructure
Asset managers are under pressure to broaden investor bases and capture new inflows, which has accelerated the use of intermediaries who may not have deep expertise in illiquid, complex structures. Private market funds differ materially from mutual funds or ETFs in liquidity terms, valuation methods and reporting cycles. Without a clear explanation, retail investors may conflate them with more liquid, transparent instruments.
While institutional investors often have dedicated teams to scrutinize these products, retail buyers rely heavily on advisors, distributors and DIY capabilities. If those intermediaries lack training, the risk of misaligned expectations increases significantly. As private markets expand access to a broader investor base, the stakes around investor understanding and protection also rise.
Mis-selling risks and investor protection
As more retail capital flows in, the credibility of the asset class is increasingly under pressure. If retail investors are misled into thinking these products are liquid, mis-selling claims are likely to follow. The real challenge is clear: most private asset managers are accustomed to quarterly institutional reporting, which falls short of the transparency and standardized disclosures retail investors typically expect.
The antidote to mis-selling is not to limit access, but to raise the bar on transparency and consistency. Plain-language materials and scenario analysis help retail investors understand both potential returns and risks. For example, showing liquidity under standardized stress conditions gives greater visibility into expected liquidity and performance over time. These tools bridge the knowledge gap and keep firms ahead of regulatory scrutiny.
Rewiring for credibility
Most private equity firms are operationally built for institutional cycles, but retail expectations are closer to daily liquidity and benchmarked returns. Without a shift in reporting infrastructure, firms risk losing investor trust. Standardized reports including historical performance with benchmark information, liquidity, fees and valuation methods used, would allow investors to compare investment products on a like-for-like basis.
Leading firms are undergoing a behind-the-scenes technological and operational transformation, from adopting real-time reporting to embedding governance practices that enhance comparability and reduce reputational risk. This includes integrating data platforms that can deliver consistent, multi-channel updates to investors, as well as building internal teams focused on retail communications and compliance.
Meanwhile, regulators across the globe are already shifting, with mis-selling concerns moving to the top of the agenda. It might only be a matter of time before this sets in, and firms that don’t adapt risk being caught unprepared. The UK’s Consumer Duty rules and the SEC’s increasing focus on retail protections are early signals of a broader global trend. Adapting now beats waiting for regulation. Firms that build transparent, scalable infrastructure will avoid reputational risk and position themselves for sustainable growth as regulatory oversight intensifies.
Sustainable growth in private capital markets doesn’t just depend on access but on transparency, rigorous disclosure and proactive education. Meeting these expectations means investing in the right infrastructure now, before regulation makes it mandatory. That means adopting the infrastructure to support it, before regulation forces the issue.