Individual Investors Are Increasing Private Equity Allocations—Is It the Right Move for You?

Key reasons behind what’s driving this fascinating and encouraging change, and why it’s happening now.

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By Ankit Kumar

With the downturn in public stocks beginning in 2022, many institutional limited partners are struggling with the so-called denominator effect, and so reducing their exposure to private equity. On the other hand, individual investors increasingly conclude that they need to make private equity a core component of their portfolios. Key motivators for this include higher returns than those available in public markets and the enduring need for portfolio diversification.

Historically, private equity products have been targeted at institutional investors, with individuals facing several barriers, such as high minimum investments, lack of liquidity, high fees, and insufficient domain knowledge. However, things are beginning to change: New investment products are being launched to better cater to individual investor needs, and new technologies are being developed to reduce the costs of servicing individuals.