Retailisation of Funds

What does this mean?

Retailisation of funds refers to the process of making investment funds, which traditionally target institutional and professional investors, more accessible to individual retail investors. This involves adapting fund structures, strategies, and marketing approaches to cater to the needs and preferences of retail investors. In the context of the European Long-Term Investment Fund (ELTIF) Regulation, retailisation involves making it easier for retail investors to participate in long-term investments, such as infrastructure projects and other illiquid assets. This is achieved through measures like reducing investment barriers, simplifying suitability assessments, and providing greater flexibility in fund terms for retail investors. The aim is to encourage a wider range of investors, including individual retail investors, to participate in long-term investments for economic growth and sustainable development.

Why is this happening?

The drive to increase access to retail capital is now a top priority for major industry funds. Many have set clear goals to grow individual investor assets under management (AUM). Blackstone envisions expanding retail capital from $200 billion to $500 billion, while KKR anticipates 30% to 50% of new capital raised in the coming years will come from the private wealth sector, and Apollo aims to accumulate $50 billion in retail capital over the next c.5 years.

Advantages of retail investor access

The diversification for retail investors allows retail investors gain exposure to a broader range of investment strategies including private equity, private credit, infrastructure, and real estate. This diversification helps spread risk across different asset classes, potentially enhancing overall portfolio performance. Moreover, increased investment opportunities mean that retail investors can now tap into strategies that were previously reserved for institutional or accredited investors. This opens up a new avenue for potentially higher returns, as many alternative assets have demonstrated strong performance. Expansion of investor base is a further advantage. For alternative investment managers, retail access broadens their potential investor base, potentially leading to increased assets under management and lower fundraising costs compared to targeting institutional investors exclusively. Additionally, closed-ended retail fund structures, like investment companies, often involve listing on stock exchanges. This not only provides liquidity to investors but also raises the profile of the management house, potentially attracting more investors.

Disadvantages of retail investor access

Regulatory complexity acts as one of the disadvantages of retail investor access. Accessing retail investors involves navigating a complex regulatory landscape, requiring compliance with various laws and regulations like the PRIIPs regulation, which can be resource-intensive. Moreover, liquidity mismatch is a further concern. Certain retail access structures may face liquidity mismatches between the fund and underlying investments, a concern for regulators that requires careful management. Compliance burden for managers are additional concerns as managers taking on retail investors directly face an additional compliance burden, including producing Key Information Documents (KIDs) and ensuring they have the appropriate regulatory licenses.


Some of the implications of these developments include the expansion of eligible investment assets. This means that the pool of assets available for ELTIFs has widened. This includes assets located outside the EU, such as subsea fibre-optic cables and renewable energy installations, provided they are in compliant jurisdictions. Additionally, the definition of real assets has been simplified, allowing for investment in a broader range of projects, including smaller infrastructure ventures. Further considerations relate to uncertainty as there are still questions regarding particular aspects, such as the minimum holding period for investors and redemption requirements. Clarity on these points will be crucial in assessing the effectiveness of the new rules in attracting retail investment.

Charting the course?

While accessing retail capital offers significant benefits, it’s crucial to carefully evaluate the specific circumstances and regulatory requirements involved. For both alternative investment managers and retail investors, understanding the advantages and potential challenges is essential for making informed investment decisions.