State Street: Retail revolution will drive 50% of private markets flow by 2027
State Street Corporation (NYSE: STT) today launched its global Private Markets Survey Report 'The New Private Markets Advantage'.
Among the key takeaways, Institutional investors are anticipating a significant uptick in retail allocations to private markets in the next two years, with retail investors set to become the main source of private market fundraising in this period, according to the latest iteration of State Street’s private markets research.
The survey of 500 institutional investors, including traditional asset managers, private markets managers and asset owners across North America, Europe, the Middle East and Asia-Pacific, finds that the majority of respondents (56%) now believe at least half of private market flows will come through semi-liquid, retail- style vehicles marketed to individuals within 1-2 years.
Product innovation in the semi-liquid fund space is the most recognised enabler of this 'retail revolution', cited by 44% of respondents globally as the best means for driving the democratisation of private markets. Recent examples range from the launch of pioneering funds like private asset ETFs to structural innovations such as the UK’s LTAF and EU’s ELTIF 2.0 rules. Notably, such innovation ranked slightly lower (37%) among North American respondents, whose primary response was ‘lowering means- based barriers to entry’ (44%), such as wealth or income minimum thresholds.
More than two in five (22%) respondents believe retail-style vehicles will be the main fundraising mechanism for private markets, up considerably from 14% last year. While enhanced appetite from retail investors is in part driving this demand, a drop-off in expectations for traditional fundraising from institutional investors is also contributing: just 39% of respondents now expect traditional fundraising to account for most flows, down from 51% last year.
Donna Milrod, Chief Product Officer and Head of Digital Asset Solutions at State Street, commented: 'The democratisation of private markets is a trend that has been underway for a number of years; however, 2025 has the potential to be a watershed year for retail allocations to private markets. Distribution to wealth channels and retail fund flows could become the dominant contributor to future fundraising. Against this backdrop, we are pleased to see respondents recognising the critical role that innovative fund products and structures are playing in fuelling and enhancing this trend as distribution broadens from institutional to mass affluent to retail over the coming years.'
‘Flight to quality’ now entrenched in investment strategies, as anticipated rate of private markets growth slows
This year’s findings support indications from earlier State Street research that the higher interest rate environment which began in the early 2020s has led to a growing focus on due diligence and risk/return assessments among investors, which has in turn prompted a pivot away from riskier private assets and towards a smaller pool of high-quality options.
