The U.S. Securities and Exchange Commission (SEC) has sent a proposal to the White House Office of Management and Budget aimed at broadening access for retail investors to private markets, including private equity, credit, and venture capital, through registered investment funds. This plan would also permit investment advisers to charge performance fees to a wider array of clients. This initiative seeks to provide more investment opportunities for retail investors to diversify their portfolios and aligns with the SEC's stated goal of ensuring "responsible retailization" of private markets, asserting that access to the full dynamism of markets shouldn't be limited to the wealthy.
This proposal extends a trend already underway in private markets. Semi-liquid private market funds, which offer periodic access to private holdings, saw substantial growth, increasing from $215 billion in 2022 to nearly $600 billion by March 2026. This expansion was largely driven by private credit, particularly through non-traded business development companies and interval funds. An earlier SEC staff decision to remove a 15% limit on private fund holdings for certain registered closed-end funds also contributed significantly to this growth. The new proposal aims to further ease constraints under the Investment Company Act and widen the eligibility for performance fees.
However, expanding access to private markets comes with considerations. While private markets, including private equity, private credit, hedge funds, and venture capital, had an aggregate gross asset value of approximately $27 trillion as of 2025, they typically have higher fees, lower liquidity, and less transparency compared to public markets. For instance, Morningstar found that semi-liquid fund fees are roughly three times higher than typical open-end mutual funds, and many cap withdrawals at about 5% per quarter. Some research suggests that the private market may be too small relative to public markets for retail access to meaningfully improve average investor risk sharing, regardless of cost. The proposal, which involves amending or creating new rules under the Investment Advisers Act of 1940 and the Investment Company Act of 1940, will undergo White House review and public comment before a final vote by the commission.
