The Inevitable Backlash
Ask A CIO #56
A lot of objections have been raised over the growth of private market funds for individual investors. Many offer valid concerns. There are absolutely situations where individual investors may be receiving inferior products, or underappreciating the risks, or taking on too many fees (or all of the above).
But now a new set of objections has been posed, and well, it was only a matter of time. The Institutional Limited Partners Association (ILPA) recently published a white paper, ILPA Retail Capital Analysis: Primer and Questions to Ask GPs.1 The discussion is less “retail investors ought to be protected” and more “retail investors might eat our opportunities.”
Let me preface here that I’m a fan of ILPA. I’m a fan of all the ways the organization has advanced the collective interests of institutional LPs investing in private markets. And I fully appreciate the issues raised. When I was in my prior foundation seat, much earlier in the rise of retail private market products, it was clear to me even then that there would inevitably be tensions between retail and institutional investors.
As you all know, I spent my entire career as an institutional investor. The advantages held by institutional investors over individual investors could fill weeks of this newsletter. It’s why we built Ivy Invest. I deeply believe in narrowing that gap, and expanding investment access for individual investors is a key step. So while I wasn’t surprised to see the criticisms raised by ILPA, I was a bit disappointed.
Alright, let’s get into it.
The white paper opens by discussing the rise of retail assets in private markets. Per ILPA, referencing data from Goldman Sachs, retail vehicles in private markets have seen a nearly 60% compound annual growth rate over the past four years and now total approximately $360 billion in assets. Of course, these evergreen retail vehicles are structurally very different from the drawdown vehicles used by institutional investors.
But, in a growing number of circumstances, these retail vehicles are investing in the exact same underlying portfolio holdings as the institutional funds. Where we ought to see cause for celebration (retail investors aren’t just being shunted into crappy investments!), some institutional LPs instead see cause for concern. Let that sink in for a minute.
The white paper continues by cataloging the ways in which retail vehicles might negatively impact institutional investors. And again, I totally understand the institutional LP viewpoint here. It’s perfectly natural for institutional LPs to want to protect the advantages they hold today. It’s just… not a great look.
A sampling of the points of contention:
Investment talent: As retail vehicles grow in size and importance to investment firms, firm leadership is likely to pay greater attention to these offerings and their investor bases. Across firms, the most talented personnel may no longer be focused entirely on serving institutional investors.
Co-Investments: Large institutional LPs value the ability to co-invest in deals alongside GPs. Co-investments can offer participating LPs additional exposure to attractive deals at lower fees (or in many cases, no fees/no carry). But with the rise of retail vehicles, a GP potentially can tap co-investment capital from that fee-paying retail vehicle, reducing the need to offer co-investments to institutional LPs.
Deal flow: Retail vehicles generally require more consistent deployment of capital and consequently may see more underlying investments than a firm’s institutional funds. Supporting a greater volume of deal flow for retail vehicles may require more of a firm’s investment team’s time and attention.
Decision making: The structural differences between evergreen retail and drawdown institutional funds may lead to conflicts in decision making, potentially around the timing of investments and exits, sizing, etc. Investment decisions may not always be made to best advantage a firm’s institutional drawdown funds.
Valuation concerns: Valuations are a big deal in retail vehicles because they directly impact share prices for new subscriptions and redemptions, management fees, and performance fees. There could be periods where a retail vehicle’s strict valuation guidelines lead to changes in marks that then impact that firm’s institutional funds.2
I promise, I really am sympathetic to institutional LPs and their concerns here. Years ago, when it started becoming apparent that retail investors could become a larger part of GP capital bases, I was similarly reflexively defensive. Today, it’s hard for me not to see that reaction, and the concerns laid out by ILPA, as instead a reflection of institutional LP entitlement. Entitlement to the best opportunities, best investment talent, best returns.
Clearly, I don’t think those things should be reserved only for institutional LPs.3 And while I think the conflict between retail and institutional investors is unavoidable, I don’t think it’s insurmountable.
We should be having conversations about how to manage these tensions, how to collaborate on LP governance, and how innovation in product structures can serve both institutional and retail investors well. The retail shift is here to stay, and it’s accelerating. Everyone will be better served if institutional and retail capital can find ways to coexist in private markets productively.
Thanks for joining this week, and as always, reach out with questions: askacio@ivyinvest.co!
See you in two weeks,
Wendy
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ILPA Retail Capital Analysis: Primer and Questions to Ask GPs, November 2025.
ILPA also raises concerns about “NAV squeezing.” Who are we kidding here? I have no idea where this term suddenly cropped up from, but let’s not pretend this is some new and ridiculous practice invented for retail vehicles. This has been the standard practice for secondary private equity for, I don’t know, since inception? Institutional investors committing to secondary private equity drawdown funds experience the same markup effect. Let’s not pretend institutional LPs haven’t also benefited from it. The manufactured outrage about NAV squeezing here and elsewhere is comical.
And if you do, at least have the courage to say it bluntly. Don’t couch it as concern for retail investors.