Private markets want to open up more and more to retail investors. This is desired by many different parties. Certainly from the fund industry, as it is tapping into a new group of investors, which brings more fee growth. But also by politicians, who have gigantic transformative projects in front of them, and need to find financing solutions for their election promises. And perhaps there really are one or two retail investors out there who are thinking to themselves: „Wow, I've been dealing with investment companies and large infrastructure investors for years now. I finally want to invest in this opaque and illiquid asset class myself in order to diversify my mature equity and bond portfolio.“

But to how many retail investors does that really apply? When in Europe 33 trillion euros are lying around unproductively, much of it in demand deposit accounts, as Deutsche Börse CEO Stephan Leithner has noted. The much less complex and much more transparent stock market already has a hard time turning conservative European savers into courageous investors. So what chances of success do the much more complex private markets products, which require a lot of explanation, have? Greater than one might think, which is partly thanks to European Long-Term Investment Funds (Eltifs). The rating agency Scope estimates that Eltif volume will increase to between 65 and 70 billion euros by the end of 2027.

Through Eltif, the EU wants to give more market participants access to investments in infrastructure projects and over-the-counter equity investments. In principle, this is a very good idea. With their long-term investment horizon, significantly lower volatility compared to liquid capital market products, and historically good returns, private market investments are theoretically perfectly suited as a building block for private pension provision. The only problem is that these products need to be understood. The long investment horizon must be adhered to in a disciplined manner. What's more, private markets are by definition not as transparent as the stock markets, for example, which makes it difficult for private retail investors to select the right funds. There are specialised databases such as Pitchbook or Preqin, but they are extremely expensive.

Two things are needed for the much-cited „democratisation“ of private markets by the fund industry to be a lasting success: more transparency and more information. There are already promising approaches to this in the market. Rating agencies such as Scope and Morningstar are contributing to transparency with their publications and analyses. Together with Blackrock, the European Investment Fund (EIF) wants to build a free database where investors can better compare venture capital and private equity funds. Providers such as Privatize are working on knowledge databases and are also providing information on private markets.

However, it is crucial that information is not only provided to private end customers. It is even more important that employees at banks and fintechs are trained. They are the real key to the democratisation movement, as they have direct access to retail customers. Union Investment and Deka probably have the greatest leverage in the German asset management industry. After all, the fund houses of the cooperative banks and savings banks have the perfect access to retail customers with their large branch network.

However, Deka does not yet offer any private markets products for retail investors at all, while Union Investment has started to do so on a small scale. Instead, neobrokers such as Scalable and fintechs such as Nao are trying to address retail investors directly. The genie is out of the bottle, the democratisation wave is rolling, and will gain significant momentum in the coming months.