Private markets set for massive push from retail ‘revolution’

Interest in private markets among retail investors is set to drive growth in private markets over the next couple of years, according to a new report.

It reveals that 56% of institutional investors believe that retail-style vehicles aimed at individuals will account for at least half of private market flows by 2027, as investors seek diversification amid geopolitical-focused volatility in public markets.

The research from State Street Corporation also found that a key driver will be product innovation in the semi-liquid space which will enable a ‘retail revolution’ in private markets – 44% of respondents said this will unlock democratization of private markets, although North American respondents were more likely to cite ‘lowering means-based barriers to entry’ such as wealth or income minimum thresholds.

Most respondents expect traditional fundraising for private markets to weaken, with just 39% thinking institutional investors will lead flows compared to 51% a year ago.

Overall, LPs and GPs both predict a private/public split of 42%/58% in their (or their clients’) portfolios within 3-5 years’ time, which represents a slight increase in their respective current allocations of 39%/61% (LPs) and 38%/62% (GPs) but there is a trend towards quality investments rather then riskier private market options that had been favored prior to the early 2020s.

“The democratisation of private markets is a trend that has been underway for a number of years; however, 2025 has the potential to be a watershed year for retail allocations to private markets,” said Donna Milrod, chief product officer and head of Digital Asset Solutions at State Street. “Distribution to wealth channels and retail fund flows could become the dominant contributor to future fundraising. Against this backdrop, we are pleased to see respondents recognising the critical role that innovative fund products and structures are playing in fuelling and enhancing this trend as distribution broadens from institutional to mass affluent to retail over the coming years.”

The report shows that geopolitics is playing into private markets’ hands with investors seeking diversification. Around a quarter of respondents cited this as their reason for increasing allocations to private equity (22%) and infrastructure (26%), while 42% said the same for private credit.