Retail investors’ allocations to private capital could surge to $2.4tn (£1.8tn) by 2030 in the US, according to a new report from Deloitte.
The Deloitte Center for Financial Services has predicted that, should recent trends continue, retail investors’ allocations to private capital will grow exponentially by 2030, from an estimated $80bn to $2.4tn in the US. In the European Union allocations are set to triple, from €924bn (£789.4bn) to €3.3tn in 2030.
This is due to the growing number of retail-friendly strategies being offered by private capital investment fund managers, and the increasing accessibility of interval funds in the US.
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Deloitte also said that it expects the inclusion of private capital within mutual funds and exchange traded funds up to the 15 per cent illiquid investment allotment will likely be a driving factor for US retail investors’ increased allocation to private assets over the next five years.
“Holdings of private capital within retirement accounts such as 401(k)s will likely be a significant portion of private capital asset under management (AUM) growth for the mutual fund product structure,” said the report.
“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.”
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Commenting on the report’s findings, Michael Aldridge, president of Accelex, said that now is the time for investment management firms to consider how they can engage this rapidly growing retail investor audience.
“There’s no escaping the fact that retail investors will be a huge growth area for private markets,” said Aldridge.
“This significant potential is encouraging the private equity industry to broaden its reach, opening up the space to enable a broader range of investors to participate. Add to this the fact that, as public equities falter globally amid tariff turmoil, all investors, including retail, are looking to alternatives as safe havens for their capital, and you have the perfect storm.
“However, this is a double-edged sword, as private markets are notorious for their lack of transparency. Even seasoned institutional investors struggle to get the data and visibility they need to make smart decisions. For retail investors, this lack of clarity could mean taking on risks without having a full picture of the investment.”
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