Increasing retail client exposure to private capital investing
Across the United States and Europe, investment management firms can unlock growth by connecting retail investors to private assets through existing product structures
For years, investment management firms in the United States and Europe have been exploring ways to increase retail investors’ access to private market investments.1 The potential benefits that private markets may provide retail investors, such as increased investor portfolio diversification, are known throughout the industry.2 Some estimates put global retail-wealth segment private capital investment holdings between US$2.0 trillion and US$2.5 trillion, but this figure only considers the holdings of high-net-worth individuals, who, by definition, are accredited investors, rather than the typical retail investor (see sidebar, “What makes someone a retail investor, anyway?”).3
When looking at the private capital investment exposure of the retail investor classes in the United States and European Union, it’s unlikely that these holdings together exceed US$1 trillion, which represents less than 7% of the total US$14.5 trillion in global private capital assets under management (AUM).4 Of these US$1 trillion private capital assets, the vast majority (90%) are likely held by retail investors in the European Union.5
While the current small allocation by retail investors to private capital may not be a surprise, recent trends suggest that some investment fund managers are beginning to notice the growth opportunity that retail investors represent. Given that regulated retail product structures for packaging private capital already exist, more investment managers are likely to include this asset class in their product offerings, such as the funds available to retirement accounts, to retail clients over the coming years.
The Deloitte Center for Financial Services predicts that, should recent trends continue, retail investors’ allocations to private capital will grow exponentially by 2030, from an estimated US$80 billion to US$2.4 trillion in the United States, and more than triple in the European Union—from €924 billion to €3.3 trillion (figures 1 and 2) (see “About this prediction”).6
What makes someone a retail investor, anyway?
Retail investors are those deemed non-accredited by financial regulators.7 In the United States, these include individuals with net worth under US$1 million (excluding their primary residence) and income under US$200,000 (or US$300,000 if they file jointly with a spouse or partner) in each of the previous two years, or if they met certain professional qualifications.8 US retail investors do not have the net worth needed to obtain “qualified client” status, so investment managers are not permitted to charge performance fees to this investor group.9 In the European Union, the European Securities and Markets Authority (ESMA) has a broader definition, and individuals may be treated as “professional clients” if at least two of the following criteria are met: the client conducts at least 10 market transactions in “significant size” in the previous quarter; the client’s investment portfolio exceeds €500,000; or the client has worked in the financial services industry for at least a year and possesses knowledge of the transactions.10
The estimated number of adults with some investable assets (between US$100,000 and US$1 million) who may qualify as retail investors and not as accredited or professional clients is 110 million in the United States and 173 million in Europe, with estimated net financial wealth of US$38 trillion and US$10 trillion, respectively.11 Together, these retail investors represent a meaningful, often untapped target market for private capital investment management firms that can contribute to future AUM growth. Under current regulations, there are existing US and EU product structures that can be utilized to increase retail investor exposure to private markets.
US retail investors are expected to put more money into private assets as options expand
Some private capital investment fund managers are increasingly exploring product structures to offer investments to this broader set of retail investors who desire greater options for liquidity and lower investment minimums.12 Under current US regulations, open-ended management investment companies, or mutual funds and exchange-traded funds (ETFs), may invest up to 15% of the fund’s assets in illiquid securities, which includes private funds and direct holdings of private companies.13 Retail investors may also invest in some interval funds, a type of closed-end fund that is not subject to the 15% illiquid securities limitation.14 Investment management firms offering interval funds set minimum investment amounts ranging from US$1,000 to US$50,000.15
One reason private fund managers may plan to launch these product structures is to help alleviate fundraising challenges the industry has experienced over the past few years.16 Another benefit for investment managers launching a registered fund is that the number of investors is no longer limited to 2,000.17 However, traditional fund managers are also launching products with exposure to private capital, and funds by both types of managers could fuel retail investor private capital AUM over the next five years.
While a large number of private assets available to retail investors are currently held within interval funds managed primarily by private capital firms, traditional investment managers are turning to structures that retail investors are already familiar with: mutual funds and ETFs.18 For example, in early 2024, Thrivent began offering retail investors exposure to private equity through their asset allocation mutual funds.19 Investment managers BondBloxx Investment Management and Virtus Investment Partners each launched actively managed ETFs with private credit exposure in December 2024.20 State Street Global Advisors’ actively managed private credit ETF launched in February 2025 with the aim to provide all investors with access to private markets by investing in both public and private credit such as asset-based finance and corporate lending.21 Another ETF recently changed its name and investment strategy to invest in shares of private companies alongside public equities by making the private purchases through a special-purpose vehicle.22
There have also been efforts to increase distribution of interval funds to retail investors. For example, the Cashmere Sweater Fund, which launched as an interval fund in 2022, recently signed a partnership with Apex Clearing to expand the fund’s distribution reach.23 Aside from increasing distribution through expanded partnerships, wealth management platforms have an important role to play in educating advisers and their clients about the potential benefits from private capital.24 To help effectively and efficiently reach the greater number of retail clients, technology will be an integral part of this education.25
We expect the inclusion of private capital within mutual funds and ETFs up to the 15% illiquid investment allotment will likely be a driving factor for US retail investors’ increased allocation to private assets over the next five years for two reasons. First, holdings of private capital within retirement accounts such as 401(k)s will likely be a significant portion of private capital AUM growth for the mutual fund product structure. Secondly, while expanded distribution of interval funds that specifically target retail investors could also contribute to AUM growth, traditional fund managers have an emergent opportunity to offer retail client exposure from the product structures with which they are already most familiar: the ETF wrapper. Fund managers exploring launching or shifting existing open-ended funds’ mandates to include private capital investments may benefit from reviewing potential tax reporting or other disclosures that may arise from the changes.
New EU regulations could catalyze retail investment growth in private assets
Compared to the United States, retail investors in the European Union have greater access to private assets through alternative investment funds (AIFs), which include hedge funds, private equity, venture capital, real estate, funds of funds, and funds categorized as “other.”26 Data from the ESMA indicates retail investors’ share of AIFs fell from 13.8% in 2022 to 11.3% in 2023.27 However, even though the overall percentage fell, the amount of assets held by retail investors remained flat at about €867 billion, while the total amount invested in AIFs rose about 15% to €7.7 trillion.28 This shows that European retail investors’ appetite for private capital seems to be holding steady, and it is likely that future AUM could grow at a slower rate given the more mature stage of the landscape in the European Union.
Recently, the ESMA has taken steps to improve access to AIFs, which can fall within the European Long-Term Investment Fund (ELTIF) umbrella.29 Under the new regulations, fund managers will no longer have to create a physical facilities agent in each country where the ELTIF is marketed, which may ease distribution of AIFs throughout the European Economic Area. Also, retail investors will likely no longer be limited to investing a maximum of 10% of their financial instrument portfolio in AIFs, and the €10,000 minimum investment amount is scheduled to be removed.30 These actions may enable a broader set of retail investors to consider AIFs because less capital is now required for an initial investment. The new regulations may also cause some retail investors who are already invested in AIFs to allocate a greater percentage of their portfolios to them. Based on these trends, over the coming year, investment managers could launch new AIFs with no minimum investment requirements that can be marketed across EU member states to reach an even broader set of retail investors.
Tapping into new opportunities in private assets
Helping retail investors gain more access to private assets can provide an attractive growth opportunity in US and EU markets. Investment management firms may want to consider how they can bring this asset class to benefit more people, not just ultra-high-net-worth and high-net-worth individuals. The push toward increasing private asset access for retail investors appears to be here to stay and will likely gather steam throughout 2025, as distribution and product configuration challenges are resolved. Looking past 2025, as US retail investors become more aware of private capital as an investment option, AUM growth will likely accelerate. By 2030, US retail investors will likely narrow the gap with their European counterparts, reaching 75% of their retail private capital holdings.
About this prediction
To estimate year-end 2024 retail investor exposure to private capital through registered funds in the United States (closed-end funds, tender offer funds, interval funds, mutual funds, and ETFs), we examined the latest N-PORT filings with the US Securities and Exchange Commission that provide details of portfolio holdings by registered investment management companies (excluding private assets that may be held within business development companies that are not subject to N-PORT filing requirements).31 We included registered funds that reported holding private equity funds, direct equity ownership of private companies, and private debt, and excluded all funds that have accredited investor requirements. Our model predicts that US retail investors’ holdings of private capital will grow from 0.2% of all reported N-PORT filing assets at the end of 2024 to 5% by 2030. For retail investors in the European Union, our model predicts their share of AIF private fund holdings will increase from 11.3% in 2024 to 30% by 2030.
This article contains general information and predictions only and Deloitte is not, by means of this article, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This article is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.
Deloitte shall not be responsible for any loss sustained by any person who relies on this article.