Private markets push into retail Europe slowed by risk profile, regulations

As institutional capital fundraising continues to decline, private equity managers are broadening access to retail investors, including pension savers.

Outreach to European individual investors lags the US by about a decade, according to William Barrett, co-founder of Reach Capital. Barrett said expansion requires fundamental product adaptations, as traditional closed-end illiquid investments are unsuitable for individual investors accustomed to liquidity.

Defined contribution (DC), or individual account retirement plans, have assets totaling more than €3 trillion in Europe, according to Garvan McCarthy, chief investment officer for EMEA and Asia at Mercer. However, European investors have markedly different risk profiles than their US counterparts; about 80% to 90% of European wealth is typically allocated to guaranteed or low-risk products.

While it is common for US retail investors to have brokerage accounts and actively trade equities, "the average Joe or Jane in Europe doesn't really trade on the S&P," Barrett said.

Fund managers are developing semi-liquid solutions through evergreen structures and life insurance units to address liquidity concerns, but Barrett said they need adapted products rather than direct institutional offerings.

"If we sell the exact same product to retail as the one we sell to institutional, I don't think that's going to work," he said.

Private equity also faces additional regulatory complexity across Europe's fragmented market structure. Despite continent-wide directives that aim to standardize investment policies, distribution remains largely governed by national regulations across 27 jurisdictions, though "everybody's motivated to find a solution," Barrett said.

Secondary market players are raising tens of billions provide reassurance for market liquidity development, and European Long Term Investment Funds (ELTIFs) primarily invest in illiqud assets and can be marketed to both retail and professional investors. Private equity firms that have launched evergreen European strategies include Hamilton Lane Inc., which launched Hamilton Lane Private Markets Access ELTIF in March and Partners Group Holding AG, which unveiled the Private Equity ELTIF Evergreen Fund last year.

– Read about private equity's push into US retirement savings market.

UK defined contribution market

The move to expand access to private market investments is a worldwide phenomenon, with asset owners, managers and regulators rapidly facilitating the transition to provide unlisted asset classes in formats that are appropriate for DC pension savers and individual investors, McCarthy said in emailed commentary.

Defined contribution assets in the UK are expected to hit £1 trillion by 2030, McCarthy said.

Pensions paid from UK DC schemes exceeded payments from defined benefits (DB) schemes in 2024, according to a report from WTW. That means DC schemes "must work harder to secure members' financial futures," according to the report.

Private equity can potentially fulfill the needs for high returns and adaptability over time as it provides diversification and returns that are not closely related to those of traditional stocks and bonds, the report said.

"We're already seeing different vehicle types and solutions emerge with the updated ELTIF 2.0 in Europe and the UK's Long-Term Assets Fund (LTAF) regime paving the way for semi-liquid structures designed for long-term savers," McCarthy said.

However, "all parts of the puzzle are not yet in place," McCarthy said, as liquidity, fair valuation and pricing remain core challenges because these assets are not traded daily.