Private-markets democratisation is not simply about widening access; it depends on responsible intermediaries guiding investors through the complexity, risks and long-term nature of illiquid assets.
As was noted during during a full day of lively debate and idea exchange at LP Congress, IPEM Global last week, “Democratisation doesn’t happen in a vacuum.”
Going forward, it is likely to resemble a representative democracy where intermediaries, sitting between the fund manager and their end clients, balance their needs and agendas alongside institutions, whose priorities may not always align. It will be a balancing act for sure, as both global institutions and HNW individuals and family offices converge in open-ended evergreen products.
Think about the run on certain private credit evergreens in Q1 2026: were Canadian pensions rushing for the exit alongside panicked HNW individuals not necessarily au fait with the liquidity mechanism of what are, despite their mis-leading ‘semi-liquid’ monicker, illiquid by their very nature? That run pushed GPs to gate their funds in order to protect investors from entering into forced selling, and avoid further deteriorating the value of underlying assets.
Distribution platforms are facing real competition as they scale their intermediary services to qualified investors. Healthy competition is to be welcomed. But it depends how it’s done. As one private banking executive said, “there is no short cut to investing in the asset class”:
“There is no passive exposure. There is no low cost approach. So the question is, if you get something cheap, what do you get in exchange? The reality of due diligence work is that it can be done in a couple of hours at the desk or it can be done over weeks on site.”
The concern is not necessarily with how private banks are intermediating their HNW clients.
It is a wider concern over how mass affluent investors (retail money), who sit one tier below, are being guided on private markets exposure via evergreens: hence the gating/redemption chaos referred to above that afflicted private credit, despite the asset class remaining fundamentally sound. This was a structural issue.
As these misunderstandings grow among retail investors, it will lead to more bad news and inevitably lead to greater regulatory concern.
Taking a portfolio-led approach
Some European private banks had tended to favour closed-ended club deals prior to more recent evergreen product innovations (i.e. under ELTIF 2.0) but building a portfolio using club deals is challenging for any financial institution. Serving professional clients, private banks needed to be certain of the quality evergreens could offer.
So far they have proven to be, enabling these institutions to take a more portfolio-led approach.
“When we sit in front of a client who wants to start a private markets program, we suggest a core part to be invested through this product because they're faster to deploy. You're already diversified, investments are at different stages of maturity. Then you can customise the satellite with single vertical funds,” commented the head of private markets at a leading European private bank.
Taking a more discretionary portfolio approach, rather than solely an advisor-led approach, places even greater responsibility on the GP’s distribution partners to understand not only what private markets products to select, but what their clients’ end goals and objectives are.
Like-minded distribution partners
Care and attention is needed to educate, especially if the client base extends wider into the mass affluent category, where platforms might offer dedicated fund-of-fund products as a ‘go to’ diversified allocation solution to private markets. “Education is something that we spend a lot of time on, and a lot of resources,” stressed one private bank executive, to avoid miss-selling. “This is indeed a true risk and this is our role as gatekeepers, as wealth managers to take time with our clients to make them understand what they are invested in,” he added.
As part of their due diligence on GPs, some private banks are adding in questions in order to ensure other distribution partners are similarly like-minded.
While the GP might be fixated on fundraising, and getting their evergreen to scale, private banks want reassurances over who else the GP is using, to mitigate the risk of any potential miss-selling: Are they like-minded distributors who are taking care of education in a certain way or are they simply passive? In the long term, GPs should carry out due diligence on each distributor they appoint as well.
After all, the more access to private markets that evergreens provide to retail capital, the more responsibility there will be for the industry as a whole to treat education and transparency to the same high standards. The risk of not doing so could have far-reaching consequences, tarring everyone with the same brush.
Fight or flight?
Perhaps understandably, transparency levels vary from manager to manager. Some are more conservative than others, more guarded. Further improvements will need to be made but to what extent? It’s a difficult question. In the institutional world of closed-ended funds, LPs always want more transparent reporting. But what are they actually doing with all this information? The same is true of evergreens.
As one of the speakers at LP Congress remarked: “It's one thing to produce information but if nobody reads it and everybody rushes to the door at the first signal there might be stress, there is no point.”
It’s akin to fight or flight. And this year, it’s mostly been flight.
This requires distributors to not only ensure sufficient disclosures are coming from GPs but also to assess the stability of the investor base within an evergreen fund under consideration. What is the concentration of private wealth capital in the fund? Does one distribution platform represent too much of the investor base? Is there a sufficient level of institutional capital to stabilise the fund?
Such questions can go a long way to ensuring the right partnerships are being made as private wealth platforms build out their portfolio-led solutions as safely and diligently as possible.
