The recent headline-grabbing gating of private credit funds has conjured memories of 2008 and prompted concerns about what systemic risks might be lurking in the rapidly growing but largely opaque asset class. But the episode also highlights the fact that the private-markets industry – which has traditionally served institutional investors – has spent recent years in hot pursuit of private wealth and retail capital. The money seeking to withdraw from private credit funds has not, by and large, been institutional, but rather newer sources of capital.

The past two years have seen a flurry of real assets and private markets asset managers launching wealth platforms and strategies. In 2024, BlackRock and Partners Group launched a strategic partnership to provide a “multi-private markets model solution” to give retail investors access to private equity, private credit and real assets in a single portfolio. Earlier this year, the two firms announced that the partnership would provide separately-managed accounts – normally the preserve of institutional investors – for wealth platforms.

When the tie-up was announced two years ago, Mark Wiedman, head of BlackRock’s global client business at the time, said: “In a world where private markets are growing by US$1trn (€848m) or more every year, many financial advisers still find it too difficult to help their clients participate. We aim to crack that.” In the same year, Jon Gray, president and former head of real estate at Blackstone, made it onto the cover of The Money Issue of Forbes magazine, talking up the US$80trn opportunity that the global private wealth market represented to firms like Blackstone.

A study by Morgan Stanley and Oliver Wyman in 2024 concluded that retail wealth investors were leading the adoption of private markets, allocating US$2.3trn to private markets in 2020 and expected to increase their allocations to US$5.1trn by 2025. A more recent report from the firms found that retail overtook institutional as the biggest source of capital for a US$135trn global asset management industry in 2024, and this is forecast to rise from 52% to 58% by the end of 2029.

Meanwhile, PwC estimates that the global assets management industry will rise from $139trn today to $200trn by 2030 – and much of that growth will come from sovereign wealth funds, high-net-worth individuals and ‘mass-affluent’ clients, which are forecast to experience compound annual growth rates of 6.6%, 6.5% and 5.7%, respectively, above pension funds (5%) and insurers (3.9%). Meanwhile, the amount of institutional capital raised for private market strategies has declined over each of the past four years, to the point where 2025 levels were 30% below the capital raised in 2021, according to Preqin.

“The scale of the retail or mass-affluent sector, coupled with the sluggishness of appetite from institutional investors, are [the two] major drivers behind increased interest in retail channels,” says Henry Cotton, senior associate for private markets investment research at Bfinance. “The combination of these factors has been the catalyst for managers seeking to provide solutions for the retail segment.” 

Indefi senior consultant Rachel Ma agrees. “This has given them an opportunity to expand their fundraising base beyond institutions who are increasingly maxing out their private markets allocations,” she says.

Another aspect of private wealth that appeals to asset managers is the potential to generate higher fees relative to the institutional space. “Fee structures for mass-affluent products tend to be higher than institutional products,” says Cotton. This comes with the caveat that the costs of managing retail money can be higher. “These costs relate to the complexity of the products, both at the front end – low minimum investments, mass interactions, high levels of marketing, education, etcetera – through to the operations. This complexity needs to be managed at a time of increasing downward pressure on fees.”

To accommodate wealth and retail investors, asset managers have launched ‘semi-liquid’, ‘evergreen’ vehicles to provide immediate access and greater liquidity. The funds are often run in parallel to their institutional counterparts. Both Blackstone and Brookfield manage infrastructure funds for wealth clients alongside their institutional vehicles, for instance.

“Retail investors generally have a lower capacity to deal with the complexity of subscription documents and capital calls needed for investment in private markets, so the introduction of evergreen funds and interval funds reduces some of the complexity,” says Zoe Brunson, chief investment strategist at AssetMark. “Having money put to work on day one rather than waiting for capital calls and eliminating the J-curve effect is seen as beneficial in evergreen fund structures. This allows for continuous subscriptions.”  

It could be argued that real assets – within the wider private markets universe – are particularly well suited to providing perpetual vehicles, due to their long hold periods and ability to generate predictable, long-term cash flows. “Unlike private equity and private debt, the real assets industry has always had at its heart the ‘core/core-plus’ open-ended commingled products,” says Cotton. “Such products are more readily suited to act as evergreen structures than close-ended vehicles.”

Misalignment: A pivot too for institutions?

But should the pivot by real assets and private markets investment managers be a concern for institutional investors? By chasing different pools of capital, are they in danger of taking their eye off the ball for their traditional clients?

Retail capital is often deployed alongside flagship institutional funds, either through parallel vehicles or as a source of de facto co-investment capital. The challenge then is managing potentially differing interests among investors with different objectives, time horizons, liquidity needs and fee arrangements.

“The broadening of private market funds to retail investors introduces structural considerations for institutional investors,” says Anne Kuleshova, senior investment director for real assets at Cambridge Associates. “These may include changes to co-investment allocation, fee structures and fund governance.”

As managers prioritise scale-friendly retail capital, institutional investors might see fewer co-investment opportunities. Retail channels often yield steadier fee streams with less origination friction, tempting managers to reserve premium co-investment slots for them.

Michael Steingold, senior portfolio manager for real assets at Russell Investments, concurs: “The economics and adverse selection bias in co-investment are both a risk for institutional investors when private markets managers have higher profitability channels with a voracious appetite for new originations.”

Kuleshova says: “Protecting institutional interests in mixed LP structures requires proactive due diligence and robust contractual protections. Institutional investors should seek clarity on liquidity management policies, redemption gates and how GPs will prioritise capital deployment across parallel vehicles.”

A key difference between the needs of retail and institutional investors tends to be the time horizon for investment. Brunson says: “Retail investors tend to chase returns and want access and flexibility to be able to withdraw funds at any point in time. Institutional investors, in contrast, tend to invest for longer periods of time as they have more predictable liabilities to match and can accept less liquidity for higher return potential.”

The challenge of providing liquidity when it is actually needed in semi-liquid private-markets vehicles has been highlighted recently by the gating of private credit funds. Blackstone experienced similar liquidity pressures with its $55bn non-listed real estate investment trust, BREIT, which recently saw record net inflows for the first time since 2022.

Liquidity, therefore, will always be an issue where retail and institutional capital is brought together. Shane Murphy, head of manager selection and derivatives at Keyridge Asset Management, says: “Any structure where there is a liquidity mismatch between assets and liabilities is going to find itself under pressure once the market experiences volatility. While these funds were seeing inflows and the market was buoyant, this liquidity was somewhat theoretical. The robustness of these semi-liquid structures had not yet been fully tested.”

Interval fund structures – where investors have limited redemption windows – are a possible solution for liquidity. Cotton says retail funds have a number of “in-built liquidity management tools”. He says: “Redemption gating – 3-5% per quarter and at the manager’s discretion – helps relieve pressure to sell down assets immediately. Managers can completely close the fund to redemptions, as we’ve seen for some real estate and private credit funds.”

Semi-liquid, evergreen funds for private markets like infrastructure pose challenges and complexities, but they can be managed, says Andrea Echberg, global head of infrastructure at Pantheon. “Having the right portfolio construction and the correct combination of asset types to be able to accommodate higher liquidity needs is key,” she says. “For managers, this evolution introduces additional complexity. Beyond asset selection, there is an increased focus on liquidity management, deployment pacing and operational capabilities.”

Echberg adds: “Diversification across the investor base, geographies and access channels also plays an important role in supporting the stability of these vehicles. It’s important to recognise that liquidity needs are not unique to any one investor group – they are relevant across both institutional and wealth clients. Evergreen structures are designed with this in mind, offering a framework that aims to balance flexibility with long-term investment discipline.”

Cotton says institutional investors can benefit from retail investor participation. “As a pool of standing co-investment capital, retail capital can help a platform’s scale, speed of execution and ability to execute rapidly,” he says. “For large infrastructure deals, for example, it prevents having to syndicate out and arrange additional co-investment commitments from third parties which could slow down a transaction. Retail capital can also represent a liquidity source for institutional capital. We see a number of funds, particularly in infrastructure, buying secondary positions, which could provide liquidity for institutional investors.”

Furthermore, Steingold says the new generation of products designed primarily for the wealth channel could have features that some institutional investors find attractive – particularly those that have smaller resources than the very large pension funds. For example, funds that offer more protection for investors could justify “a higher fee than from a comparable institutional product from the same manager”.

Steingold says: “This can be doubly true when the manager’s wealth product is in a regulated structure, which may lower diligence costs and be a more natural access point to private markets for an institution whose capabilities are oriented toward public markets.”