According to State Street research conducted not long before the announcement, private markets managers were already generally optimistic about the prospects for growth in funds designed to distribute private asset classes to individual investors. As managers face increasing pressure on margins, the ability to bring products to markets that bring private asset classes to new investor types is valuable to the industry, and improved regulatory circumstances will enable them to focus on product innovation in this sphere.

And our research shows North American managers believe there’s a confluence of demand from both investors and providers driving this trend, but also note the need for continued innovation and regulatory developments to help the market truly achieve its potential.

According to the results of our recent State Street 2025 Private Markets Study,¹ our fourth annual global survey of the sector, more than a third (38 percent) of these managers anticipate at least half of their private markets flows coming through funds aimed at individual investors within the next two years.

Our new research shows that 29 percent of general partners (GPs) believe semi-liquid and other retail-style vehicles will account for approximately half of flows within that same timeframe, with a further nine percent predicting they’ll make up the majority of fundraising.

Nearly half (42 percent) believe there is strong demand from individual investors, and this is a key driver of this market. A further 39 percent think increasing numbers of individuals already accessing private markets in this way is creating momentum for future growth. A third (33 percent) also see more providers and products entering the market in recent years as crucial to the development of these fund types.

An example of new product innovation in this space is State Street Investment Management this year partnering with alternatives manager Apollo to launch the SPDR Public & Private Credit ETF (PRIV).

Respondents are also seeking a number of developments to help them capitalize on these headwinds and benefit from the potential for increased flows, our data predicts.

Top on managers’ agendas is reducing or even removing means-based barriers to entry. More than half (56 percent) of our respondents said reducing the minimum wealth requirements or investment levels was the most important change needed to grow the market for these funds.

Governments and regulators also have a role to play, according to our study, and 41 percent of respondents called for intervention to relax rules governing liquidity within semi-liquid funds. The same number said “more frequent, timely and high-quality data, enabled by regulations governing data from holding companies/real assets to GPs” is essential.

For more information about these trends, as well as GPs’ and LPs’ plans for asset allocation and technology investment, download our report on the survey here, or contact your State Street relationship manager.