Retail investors currently hold the majority of global assets under management, but only 16% is allocated to alternative assets like PE, according to Bain & Company.
Capital Challenges: Institutional capital is no longer sufficient to sustain PE’s growth due to rising interest rates, poor exit markets, and overexposure of pension funds. Capital raised in 2024 is on track to hit its lowest level since 2020, driving firms to seek wealthier retail investors for fundraising.
Retail Hesitation: A Financial Planning Association survey shows only 16.83% of financial planners recommend PE this year, down from 23.04% in 2023. Retail investors are concerned about illiquidity, declining returns (8.7% one-year horizon IRR in Q1 2024), and economic pressures like inflation and market volatility.
“Retail investors may still find PE appealing for diversification and higher returns, but firms should temper expectations for rapid adoption." – Leah Hodgson
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PE wants retail investors' money – but are they eager to give it?
SOURCES
Pitchbook, Nov 2024 - PE wants retail investors’ money—but are they eager to give it?
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