Retail investors are increasingly eager to access private equity (“PE”), drawn by the promise of higher returns and diversification. With public markets dominated by a narrow set of tech-driven mega-cap stocks, the appeal of uncorrelated, long-term private market exposure is growing.
According to the American Investment Council’s 2025 public pension study, private equity delivered a median annualized return of 13.5% over the 10-year period ending in 2024. It was also the best-performing asset class in public pension portfolios—outpacing public equity, real estate, and fixed income.
To date, retail investors have had limited access to burgeoning private assets, an immense marketplace. Private assets, including PE, have tripled in size since 2013 and are projected to reach $65 trillion globally by 2034, according to Bain. And more than 1,500 global startups now carry unicorn valuations, as companies stay private longer.
Retail interest is being reinforced by a shift in policy. Congress is weighing legislation to allow defined contribution retirement plans—including 401(k)s—to access private equity. A new executive order is expected to clarify fiduciary protections for plan sponsors, particularly around fees and valuation concerns.
However, retail’s arrival comes just as the private equity model is undergoing a profound transition.
A New Playbook for PE
For much of the past decade, PE thrived on cheap debt, rising valuations, and global dealmaking. That model is under pressure. “Performance levers that were pulled to such great effect during the low-rate era—principally financial leverage and valuation expansion—will lose potency,” notes Future Standard in their recent private markets outlook. Rather today, with borrowing costs higher and valuations compressed, managers must create value through margin expansion, pricing power, and operational efficiency.
Meanwhile, the macro backdrop isn’t helping. Current US policies have clouded the M&A environment, where valuation is often negatively correlated to volatility.
And timely exits, which underpin PE’s return profile, are becoming harder to achieve. Distributions as a share of net asset value have fallen to just 11%—the lowest in over a decade. And PitchBook estimates there are over 12,000 U.S. PE-backed companies in inventory—enough to last seven or eight years at the current exit pace.
Even elite investors are adjusting to this new PE environment. Yale University, long an advocate of PE, is reportedly seeking to sell up to $6 billion in private equity holdings to manage liquidity constraints.
Wall Street Eyes Retail
As institutional fundraising slows, Wall Street is turning to retail. BlackRock recently launched a target-date fund including private equity and credit, backed by $30 billion in acquisitions to expand its private markets platforms.
Certainly, private equity remains a powerful investment engine, but it’s evolving. While institutional investors are equipped to navigate illiquidity, fees, and valuation opacity, the average retail investor may not be.
Products reaching individual investors often lack the access or pricing advantages of large institutions. Layered fees—across platforms, managers, and structures—can severely dilute returns. In a lower-return environment, that friction matters more.
Retail Proceeds with Care
Successful retail participation will depend on access via sophisticated fiduciary advisors—those bound to act in a client’s best interest and capable of navigating complexity.
Policy may soon open the doors wider, but access is not the same as advantage. For retail investors, the PE opportunity is real—but so is the challenge to enter wisely.