Retail investment in private markets

There is a growing push to open private markets, historically the exclusive domain of institutional investment, to retail investors. A major shift occurred on 7th August 2025, when U.S. President Donald Trump signed an Executive Order allowing 401(k)s and other workplace retirement plans to invest in alternative assets. This move aims to democratise access to higher-return investments and promote retirement outcomes. While the opportunity may be compelling, this introduces considerable risks, particularly for less experienced investors and the long-term stability of retirement savings.

This article will discuss the allure of private markets, its challenges, risks and insurance considerations.

The appeal of private markets

Private markets include investments like private equity and private credit. Their appeal is twofold:

Superior returns: Private assets have historically outperformed public markets, often achieving superior risk-adjusted returns for investors. According to 2024 figures from S&P Capital IQ published by Apollo, upwards of 85% of U.S. companies with annual revenues of over USD 100 million are privately held, meaning retail investors are missing out on substantial growth opportunities.

Diversification: Private assets are less correlated with public markets and can offer more stable, inflation-protected returns that, unlike public assets, are not significantly impacted by geopolitical uncertainties and inflationary pressures.

As companies increasingly delay or skip initial public offerings, retail investors are excluded from major growth opportunities. Expanding access to private markets is seen to help everyday investors diversify and maximise returns, but this shift entails significant risks that require careful consideration.

Recent Securities and Exchange Commission (SEC) guidance marks a shift: it no longer requires restrictions on investor eligibility (such as accredited investor status), minimum investment thresholds, or caps on exposure to private funds (e.g. the 15% limit) for registered closed-end funds investing in private funds.4 This reflects a recognition that wealth-based eligibility is outdated, especially with the rise of fintech platforms and more sophisticated retail investor profiles.

However, regulatory safeguards – such as audit standards, disclosure rules, and liquidity protections – remain weaker in private markets. Without robust data on retail investor behaviour and fund performance, regulators face challenges in the development of appropriate regulatory safeguards. The SEC’s guidance is a step forward, but it must be accompanied by stronger protections to avoid adverse outcomes.

Insurance considerations

Opening private markets to retail investment illustrates a significant shift in the investment landscape. Political and regulatory reforms, investor demand, and industry innovation are opening doors to asset classes that have historically been out of reach. This creates financial opportunities, but also regulatory challenges that require close collaboration amongst investors, market participants and regulators.

Comprehensive company insurances such as Directors’ & Officers’ Liability, Professional Indemnity / Errors & Omissions, and Crime can assist firms navigating this evolving environment by:

• Supporting regulatory compliance by offering protections required under new regulatory regimes;
• Enhancing investor confidence by demonstrating robust risk management protocols;
• Protecting against financial losses associated with litigation, operational failures, or emerging liabilities; and
• Safeguarding directors and officers involved in decision-making processes that may later be scrutinised by regulators or investors.

Fiduciary Liability Insurance considerations are also particularly relevant for retirement plan sponsors. While some firms may hesitate to adopt private market options, others may face pressure from employees. Insurers have already begun asking questions about current and future private fund investments and may consider raising premiums or retentions accordingly. Retirement plans could become potential plaintiffs against funds that encounter significant issues, especially in efforts to preempt participant lawsuits alleging imprudent investment encouragement.

As this space develops, it is important for firms to regularly review their insurance policies to ensure it reflects the current risk environment. If you would like help in mapping risks, modelling exposure, or reviewing your existing insurance programme, please get in touch with our team of specialists.