Frans Verhaar: Democratization or retailization of private markets?
This column was originally written in Dutch. This is an English translation.
By Frans Verhaar, Managing Director, Head of Continental Europe at bfinance
Ten years ago, private markets were still the preserve of pension funds, sovereign wealth funds, and large banks. For wealth managers, private equity, private debt, and infrastructure were mainly something to observe from a distance, not something to gain access to themselves.
Today, that picture has changed radically. Private markets are no longer reserved for institutional capital, but are increasingly penetrating propositions aimed at high net worth individuals and even the ‘mass affluent’ target group.
The key question is therefore no longer whether asset managers can offer access, but how that access should look – and for whom.
Two forces
The current development is driven by two different forces that are often confused: democratization and retailization. The distinction seems semantic, but in practice it is crucial.
- Democratization means removing traditional barriers, such as high minimum deposits, complicated operationalization, and strict regulation. This makes institutional quality accessible to high net worth individuals.
- Retailization, on the other hand, revolves around developing completely new products, specifically designed for a broad retail audience. Think of funds with greater liquidity and simple structures, often at the expense of returns, cost structure, or robustness.
In other words, democratization opens the door to existing institutional strategies, while retailization builds a new house—but not always with equally solid foundations.
The promise of evergreen structures
An important vehicle in this development is the emergence of evergreen funds. These offer continuous entry opportunities, automatic reinvestment of distributions, and periodic liquidity. For asset managers and their clients, this sounds like music to their ears: no more complicated capital calls, no J-curve, and easier integration into the portfolio.
But here too, convenience comes at a price. Evergreen structures entail risks, such as liquidity mismatches, high cash buffers that erode returns (70–100 basis points of performance drag is not unusual), limited track records, and fee layering. The latest generation, which even promises weekly or daily liquidity, raises the question of whether the underlying illiquid investments can keep up with that pace.
In private markets, more liquidity is not necessarily better.
From access to adoption
Whereas the first wave was mainly about access, the current phase is one of adoption. Asset managers no longer want to be dependent on external platforms, but want to be the architects of their own private markets proposition. This can be achieved through curated fund menus, proprietary multi-manager structures, or in collaboration with specialized B2B partners. The goal: a scalable and distinctive proposition that offers clients real value and positions the advisor as a trusted guide rather than a fundraiser.
The commercial incentive for general partners (GPs) to serve this channel is evident. With more than $478 trillion in assets worldwide – rising to $629 trillion in 2028 – and a cooling institutional fundraising market, private wealth is simply too big to ignore.
The downside of retailization
Retailization brings innovation, but also temptation. Products with overly flexible liquidity conditions or overly attractive marketing claims threaten to undermine the essence of private markets: accepting illiquidity in exchange for higher expected returns and diversification.
Those who confuse product availability with suitability for the portfolio run the risk of damaging client trust. In an asset class where the difference between top and bottom quartile managers can be as much as 1,000 basis points, the margin for error is large.
What now?
The question is no longer access or no access. That battle has been fought. The question is: how do we select wisely, how do we integrate private markets into portfolios, and how do we maintain the balance between innovation and integrity?
Wealth managers have an opportunity to distinguish themselves by:
- critically selecting between institutional quality and marketing-driven newcomers.
- consciously dealing with the trade-offs of evergreen structures.
- offering customization that fits within the broader portfolio construction and risk appetite of the client.
Democratization has lowered the threshold, and retailization has broadened distribution. The next phase requires judgment: the ability to design a sustainable, robust private markets strategy for clients amid the noise of product offerings and marketing hype.
Because access is nice, but ultimately it's about outcomes.