Top Five Trends for the Democratization of Private Capital in 2026
June 2026
Top Five
Trends for the Democratization of Private Capital in 2026
June 2026
Retirement Capital as the
Next Frontier
Following a 2025 executive order to facilitate access to alternative assets in 401(k) plans, the democratization of private markets has entered a new phase.
The biggest global managers are already actively investigating new structures to access this almost $14 trillion market. Enthusiasm for expanding defined contribution pension plan access to private markets is growing, especially via bank-managed common investment trusts (CITs) structured as target date funds and illiquid ‘sleeves’ within traditional mutual fund portfolios.
In response to the Department of Labor (DOL) issuing a formal rule proposal in response to the executive order in early 2026, managers and other market participants have accelerated their efforts to develop vehicles and investment programs to provide 401(k) plans with access to a broad spectrum of alternative investment options once new DOL rules have been finalized. This is expected to occur later in 2026.
Total Value of U.S.
Defined Contribution Pension Funds 2020-2025
Source: FRED
In particular, the DOL, in its rule proposal, has sought to provide greater clarity through proposed safe harbor provisions that would limit the level of regulatory and litigation risk for plan fiduciaries that opt to include illiquid assets-focused vehicles as investment options.
With the issuing of the initial DOL rule proposal, the public comment period has commenced. While the private capital industry appears generally supportive of the safe harbor approach reflected in the DOL’s rule proposal, a number of questions remain around the actual implementation of those safe harbors.
We expect significant industry efforts to reframe certain points within the rule proposal to make the final rules more usable in practice for both managers of alternative asset-focused investment vehicles and plan fiduciaries. However, the plaintiffs’ bar has been vocal about its intention to challenge plans that choose to include alternatives, regardless of the safe harbor provisions in the DOL’s final rules.
The sheer size of the defined contribution market has the potential to be transformative for private markets. But the regulatory environment, and the DOL rules around plan fiduciaries selecting investment options that provide access to private market investments, must be navigated first.
Retirement Capital as the Next Frontier
Following a 2025 executive order to facilitate access to alternative assets in 401(k) plans, the democratization of private markets has entered a new phase.
The biggest global managers are already actively investigating new structures to access this almost $14 trillion market. Enthusiasm for expanding defined contribution pension plan access to private markets is growing, especially via bank-managed common investment trusts (CITs) structured as target date funds and illiquid ‘sleeves’ within traditional mutual fund portfolios.
In response to the Department of Labor (DOL) issuing a formal rule proposal in response to the executive order in early 2026, managers and other market participants have accelerated their efforts to develop vehicles and investment programs to provide 401(k) plans with access to a broad spectrum of alternative investment options once new DOL rules have been finalized. This is expected to occur later in 2026.
Total Value of U.S.
Defined Contribution Pension Funds 2020-2025
Source: FRED
In particular, the DOL, in its rule proposal, has sought to provide greater clarity through proposed safe harbor provisions that would limit the level of regulatory and litigation risk for plan fiduciaries that opt to include illiquid assets-focused vehicles as investment options.
With the issuing of the initial DOL rule proposal, the public comment period has commenced. While the private capital industry appears generally supportive of the safe harbor approach reflected in the DOL’s rule proposal, a number of questions remain around the actual implementation of those safe harbors.
We expect significant industry efforts to reframe certain points within the rule proposal to make the final rules more usable in practice for both managers of alternative asset-focused investment vehicles and plan fiduciaries. However, the plaintiffs’ bar has been vocal about its intention to challenge plans that choose to include alternatives, regardless of the safe harbor provisions in the DOL’s final rules.
The sheer size of the defined contribution market has the potential to be transformative for private markets. But the regulatory environment, and the DOL rules around plan fiduciaries selecting investment options that provide access to private market investments, must be navigated first.
Expansion and Normalization of Private Placement Structures for Retail-Adjacent Investors
Asset managers seeking access to retail capital are increasingly turning to private placement structures as a more efficient means of effecting the retailization of private markets.
Historically, many of these vehicles, and particularly those registered under the 1940 Act, were sold as publicly offered vehicles, with all the regulatory implications that entails. In addition to the SEC overlay, many of these public offerings were also subject to extensive Blue Sky reviews by individual states.
Projected Growth of Target-Date Assets and Share of 401(k) Contributions Through 2030
Source: PwC
However, we are increasingly seeing a move towards the use of traditional private placements for these types of offerings, with significant benefits for raising capital from retail adjacent investors. Private placements under Regulation D still allow for selling to a wider range of investors without full SEC registration under the Securities Act. While public disclosure is still required, these privately offered products avoid the state Blue Sky overlay that applies to their publicly offered peers.
To date, the shift has been largely confined to traditional private placements, which omit any form of general solicitation, but we are now seeing a move to take advantage of Rule 506(c) under the SEC’s Regulation D private placement exemption that allows companies to utilize general solicitation, provided issuers take reasonable steps to verify that investors are accredited.
While that verification process was historically seen as unduly burdensome for retail investors, recent SEC guidance and the increasing availability of technology-based solutions have made verification a more realistic process for many issuers.
The Evolution of Asset Classes Offered to Retail Capital
Retail investors’ initial foray into alternative assets involved non-traded REITs, followed by private credit. As yield-based products, both real estate and private credit offer investors the potential of a steady distribution stream, making them a logical first step.
More recently, retail products focused on acquiring secondary investments in private funds have proved successful, aligning with the broader trends towards secondaries strategies in the private equity and credit spaces. In addition, a number of managers have launched new retail-like products focused more on pure private equity-style investments. These are designed to mirror the investment program of a more traditional private equity-focused strategy, but with a liquid portfolio component to allow investors to redeem their interests in line with other more broadly marketed retail products. Given regulatory considerations, these newer products tend to be limited to qualified purchasers, rather than pure retail investors.
There are also a number of players in the market looking to develop products focused on venture capital-style investments, including several that have sought exchange listings and a publicly-traded model versus offering periodic liquidity to investors. There is clear appetite among retail investors to gain early-stage access to high growth tech companies, given the potential for significant capital appreciation.
However, from the sponsor’s perspective, there remains reluctance among prospective venture capital-backed companies to allow their shares to be held by such retail-focused vehicles, given the need for public valuations and concerns around other competitive sensitivities. Other asset classes entering the fray include infrastructure, energy transition, and asset-based finance.
More recently, retail products focused on acquiring secondary investments in private funds have proved successful, aligning with the broader trends towards secondaries strategies in the private equity and credit spaces. In addition, a number of managers have launched new retail-like products focused more on pure private equity-style investments. These are designed to mirror the investment program of a more traditional private equity-focused strategy, but with a liquid portfolio component to allow investors to redeem their interests in line with other more broadly marketed retail products. Given regulatory considerations, these newer products tend to be limited to qualified purchasers, rather than pure retail investors.
There are also a number of players in the market looking to develop products focused on venture capital-style investments, including several that have sought exchange listings and a publicly-traded model versus offering periodic liquidity to investors. There is clear appetite among retail investors to gain early-stage access to high growth tech companies, given the potential for significant capital appreciation.
However, from the sponsor’s perspective, there remains reluctance among prospective venture capital-backed companies to allow their shares to be held by such retail-focused vehicles, given the need for public valuations and concerns around other competitive sensitivities. Other asset classes entering the fray include infrastructure, energy transition, and asset-based finance.
Retail Access to Public Markets: Are Public Listings Going to Make a Comeback?
The main challenge facing exchange-listed 1940 Act products has been the risk of trading below book value, thereby restricting the ability to raise further capital. This risk has reduced the appetite for public listings of registered closed-end funds and BDCs in recent years.
However, we are now seeing signs of a comeback, most notably with the news that Robinhood Markets has completed a $1 billion IPO for a new closed-end fund, which began trading in early March.
We are also starting to see the emergence of ‘one and done’ public offerings, where a manager takes a pool of assets public, with no intention of making further acquisitions or raising additional capital. This helps alleviate the pressure of trading under book value subsequent to becoming exchange listed.
Other venture capital players are also looking closely at publicly traded options, following the successful Robinhood Markets IPO. In this scenario, managers are looking to assemble high profile names with a view toward mitigating the inherent market pressure that causes equity focused closed-end funds to trade below book.
Retail Access to Public Markets: Are Public Listings Going to Make a Comeback?
The main challenge facing exchange-listed 1940 Act products has been the risk of trading below book value, thereby restricting the ability to raise further capital. This risk has reduced the appetite for public listings of registered closed-end funds and BDCs in recent years.
However, we are now seeing signs of a comeback, most notably with the news that Robinhood Markets has completed a $1 billion IPO for a new closed-end fund, which began trading in early March.
We are also starting to see the emergence of ‘one and done’ public offerings, where a manager takes a pool of assets public, with no intention of making further acquisitions or raising additional capital. This helps alleviate the pressure of trading under book value subsequent to becoming exchange listed.
Other venture capital players are also looking closely at publicly traded options, following the successful Robinhood Markets IPO. In this scenario, managers are looking to assemble high profile names with a view toward mitigating the inherent market pressure that causes equity focused closed-end funds to trade below book.
Private Equity Sponsors Recognize That Retailization Is Too Big to Ignore
Not all sponsors are exploring the retail sector. The majority view the move as more of a medium to long-term objective, particularly given the implementation costs involved. However, there are few managers today that are not actively looking at ways to engage with the retail channel, given the potential for significant AUM growth. There is a clear recognition that taking no action means being left behind. It is certainly on the radar and managers are looking for the right access routes and investment strategies to target the retail space.
Some firms are opting to target the retail capital space with the formation of semi-liquid vehicles catering to individual qualified purchasers. This will ensure that in the long-term, they will have the right institutional capabilities and track record in place required to cater to a retail audience, including through products that can attract a broader retail investor base in the future.
In addition, sponsors are exploring JV arrangements, whereby they are plugging their asset management capabilities into existing distribution channels or teaming up with other asset managers, banks or financial institutions to develop retail or retail-adjacent platforms. When compared to building out full scale retail infrastructure, teaming up with a JV partner with an existing distribution network can reduce the cost of the initial launch process, though the manager is inevitably giving up some of the longer-term upside as part of the JV relationship.
Finally, we are seeing sponsors working to ensure that there is sufficient flexibility in their existing documents to carve out a space for potential retail vehicles when the time is appropriate.
Not everyone is ready to embrace the full force of private markets democratization today, but the vast majority of firms are already laying down the mission-critical groundwork.
Private Equity Sponsors Recognize That Retailization Is Too Big to Ignore
Not all sponsors are exploring the retail sector. The majority view the move as more of a medium to long-term objective, particularly given the implementation costs involved. However, there are few managers today that are not actively looking at ways to engage with the retail channel, given the potential for significant AUM growth. There is a clear recognition that taking no action means being left behind. It is certainly on the radar and managers are looking for the right access routes and investment strategies to target the retail space.
Some firms are opting to target the retail capital space with the formation of semi-liquid vehicles catering to individual qualified purchasers. This will ensure that in the long-term, they will have the right institutional capabilities and track record in place required to cater to a retail audience, including through products that can attract a broader retail investor base in the future.
In addition, sponsors are exploring JV arrangements, whereby they are plugging their asset management capabilities into existing distribution channels or teaming up with other asset managers, banks or financial institutions to develop retail or retail-adjacent platforms. When compared to building out full scale retail infrastructure, teaming up with a JV partner with an existing distribution network can reduce the cost of the initial launch process, though the manager is inevitably giving up some of the longer-term upside as part of the JV relationship.
Finally, we are seeing sponsors working to ensure that there is sufficient flexibility in their existing documents to carve out a space for potential retail vehicles when the time is appropriate.
Not everyone is ready to embrace the full force of private markets democratization today, but the vast majority of firms are already laying down the mission-critical groundwork.
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