One of the world’s largest sovereign wealth funds has cautioned that growing access of retail investors in private markets, which translated into semi-liquid assets worth $344 billion in 2024, could hurt returns and squeeze opportunities for institutional players.
As the rapid rise of so-called democratisation of private alternative assets for everyday and small-ticket investors shows no sign of slowing down, the pace at which the development unfolds can be potentially risky, GIC group CIO Bryan Yeo said during a session at the Milken Institute Asia Summit in Singapore.
“If there is going to be a flood of money coming in in the next 12-18 months, that could be a problem. Because that would then mean deployment of large amounts of inflows into a limited set of good opportunities, which could then lead to a lowering of underwriting standards and to lower returns and bigger issues down the road,” the GIC executive said.
With the likes of Blackstone and KKR aggressively targeting the evergreen market through multiple fund launches in the past 24 months, semi-liquid fund assets have jumped 60% since 2022, fueled by growing demand for private credit and private equity, Morningstar reports.
Diversification into previously underallocated private assets may help individual investors preserve wealth, but it could also erode the negotiating advantage of large limited partners who usually write the biggest cheques. “There is a positive side to it, but for institutional investors like us, it could also mean greater competition for good deals,” Yeo said.
Besides investor demand, private equity behemoths have increasingly turned to retail investors in recent years, as institutional fundraising faces headwinds from slower capital returns in many exit-dependent strategies. Regulators across the US, Europe, Hong Kong, and Singapore review rules to allow a new group of investors to allocate in private markets.
The London Stock Exchange was the latest to let eligible retail investors bet on late-stage companies that are staying private for longer in a partnership with Crowdcube that is bridging the gap between public and private markets.
Yet, these developments are unlikely to dramatically alter the core relationships that drive the market, at least according to an investor from a $76 billion asset management firm.
“The relationship with institutions, to me, is still going to be central to how capital is formed for many of these asset classes,” said TPG President Todd Sisitsky, adding that he doesn’t see the dynamic between his firm and large institutions like GIC changing.
“A lot of things will just continue to evolve. There’ll be a continued increase in access and in structures that allow the retail investors and the high net worth investors to participate in markets that have previously been unable to access. And I think that’ll fundamentally be a healthy thing.”
