By Abby Schultz
As individual investors pour into private markets, questions are being raised about the implications for private equity, venture capital, and other alternative assets, and for the institutional investors that have depended on these sectors for outsize returns and diversification for years.
Among those investors are single-family offices -- institution-size organizations with at least $100 million in assets but usually far more -- that manage investments, philanthropy, and everyday finances for wealthy families.
"We are clearly entering a new era," said Andrea Auerbach, global head of private investments at Cambridge Associates, an investment firm that builds and manages investment portfolios for family offices, wealthy individuals, and institutional investors. "This is going to change the dynamic, and how managers behave with institutional investors who have been with them for 25 years."
The number of public funds that have been structured for individuals to invest in alternative asset classes has surged in the past few years. These evergreen structures, as they are generally grouped, grew to at least 505 funds with $500 billion in assets as of the fourth quarter last year from about 278 funds with $245 billion in 2022, according to a December report from PitchBook and Morningstar.
A recent survey of financial advisors by BlackRock found more than half are investing in private markets for their clients, but adoption is modest. Investors who hold private market assets allocate only about 7% to the sector, the survey found.
That could change as the U.S. Department of Labor is preparing rules for adding private-market assets to 401(k) retirement plans, which is expected to create more demand for evergreen fund structures. The rules are in response to an August executive order by President Donald Trump.
401(k) plans alone held more than $9 trillion in assets as of the second quarter last year, according to the Investment Company Institute. If participants in these plans were to allocate 10% of their portfolios to private-market offerings, that would send $900 billion into assets that aren't publicly traded, on top of capital that is already surging into these funds from retail investors, Auerbach says.
By comparison, the alternative assets industry raised only $549 billion for private equity, venture, and secondary investments from institutional investors in 2025, she says, citing data from PitchBook.
Although $900 billion is unlikely to move into private assets overnight, the surge of capital will reshape the markets for alternative asset classes. Some of those changes may not benefit family offices or other institutional investors.
Traditionally, funds that hold alternative assets are structured as long-term investments, with strict rules around when capital can be returned to investors. Investors who are willing to put their capital at risk for years -- over a decade in some cases -- do so for the excess returns private markets can potentially provide.
But retail evergreen funds -- which include interval and tender offer funds in addition to real estate investment trusts and business development companies (BDCs) -- must provide opportunities for investors to redeem shares. [An interval fund is a type of closed-end vehicle that provides investors with the opportunity to repurchase a small number of shares each month or quarter, while a tender offer fund -- also closed-end -- allows for share repurchases at the board's discretion. BDCs provide financing to small and medium-sized businesses.]
"In practice, private-market portfolios rarely generate cash flows sufficient to meet regular quarterly redemptions," according to Luke Proskine, a managing partner at Makena Capital, an investment firm focused on alternative investments that serves family offices, endowments, and foundations.
"To manage this mismatch, many funds adjust portfolio construction to support liquidity targets rather than [the] underlying investment opportunity," Proskine said.
They will hold cash or liquid "sleeves" of investments that can be easily sold, or they rely on credit facilities or continuous fund-raising to support redemptions. If these strategies aren't enough, an evergreen manager may have to limit redemptions or sell assets "under less favorable conditions," Proskine added.
"In our view, structuring portfolios around liquidity that is not naturally available can dilute return potential and introduce asset-liability mismatches," he said.
Neal Prunier, managing director, industry affairs, at the Institutional Limited Partners Association, a trade group for institutional investors, agrees. "Historically, private equity and venture has succeeded because they are long-term investments within a long-term structure," Prunier said in an interview.
The liquidity features of evergreen funds means these structures aren't as long-term, Prunier says. Also, he notes, investment valuations and fees are structured differently between retail and institutional vehicles, as is the investment approach the managers take.
To say that retail funds are democratizing private markets -- a common statement from the industry -- is disingenuous, as "these retail vehicles are fundamentally different products," Prunier says.
The issue is that general partners -- the investment managers that create private-market funds -- will be answering to every day retail investors in addition to their longtime investors -- wealthy individuals, family offices and institutions (who are called limited partners when they invest in traditional private-market funds).
A general partner that directly buys an asset -- such as a ski resort, or a manufacturing business -- will allocate that asset into different vehicles. Some of the assets could go into a traditional private-equity fund, while some could be allocated to evergreen strategies, according to Zane Carmean, PitchBook's director of quantitative research.
"It makes a lot of sense from the manager's perspective to try to get access to the deals across the portfolio of product that they're offering," Carmean says, adding that this allows them tell retail clients that they are getting institutional-quality assets, and provides proof that they are aren't treating investors differently.
But this approach also means the same deal is splintered into funds sold to investors with different expectations.
A related concern of ILPA's members is that general partners will prefer providing co-investment opportunities to retail funds. In a co-investment, a family office or institution can invest alongside the general partner or manager at a lower cost than if they were a limited partner. But co-investment allocations to retail funds are made at the traditional fee rate, Prunier says.
A traditional private-equity fund charges a 2% annual management fee on capital the investors commit to the fund, plus 20% of profits above a preset hurdle rate. The median net fee on retail evergreen funds was more than 3% in the fourth quarter, according to PitchBook.
"General partners are able to earn more fee income through providing co-investment allocations to the retail fund rather than to institutional investors," Prunier says. "This is particularly challenging because co-investments have never been more important to institutional limited partners as a way to generate stronger performance and to reduce their total fee load."
Family offices are still very interested in private-market investing, however. In 2025, 28% of investors tracked by BlackRock's Preqin Pro who were investing, or considering investing, in private equity, were family offices, the firm said. And consider that the wealthiest family offices in the world -- two-thirds of which have assets of $1 billion or more -- allocated 42% of their portfolios to alternative products last year, including private credit, hedge funds, and real estate, according to Goldman Sachs.
The question of whether a manager will be equally incentivized to support both retail and institutional funds is a "fair concern," Auerbach says.
Cambridge Associates believes a lot of retail capital will be captured by a subset of alternative asset managers who have been positioning themselves to capture this market.
Consider Capital Group's partnership with KKR, an alternatives investment manager, to provide private-market options to retail investors or, similarly, alts manager Apollo's partnership with State Street, among others.
For Cambridge Associates and its clients, Auerbach says they are thinking about where "all this money is going to land," and looking instead for "where that money may not be going."
As she and a colleague wrote in a client note over the summer, "with thousands of GPs in which to invest, the opportunity set for institutional investors extends far beyond those GPs in hot pursuit of the individual investor."
Write to Abby Schultz at abby.schultz@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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January 15, 2026 04:00 ET (09:00 GMT)
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