What's Holding Private Investors Back? Understanding the Access Barriers to Private Markets

An iAccess Partners Series: Episode 4/6

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Our last episode highlighted the allocation gap between institutional and private investors in Private Markets. This time, we examine the structural barriers that, up until now, have prevented this gap from narrowing. While these hurdles still exist, industry innovation has increasingly lowered and eliminated some of the traditional hurdles to access.

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Key takeaways: Episode 4/6

1.  High minimum investments have historically made Private Markets inaccessible for all but ultra-wealthy investors.

2.  Fund selection is challenging due to limited transparency, fragmented data, and wide dispersion in manager performance.

3.  Operational complexity and illiquidity create significant hurdles – even for those who meet the wealth threshold.

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Key challenges for private investors in Private Markets

Historically, accessing Private Markets as an individual investor has been more complex than buying public stocks or mutual funds – and less standardized. Below, we break down four of the most significant barriers that have historically stood between private investors and Private Markets.

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1.   High minimum investments and the diversification dilemma

Private Markets funds typically require large minimum commitments, often starting at $5 million per fund investment. To make matters more challenging, building a well-diversified Private Markets portfolio typically requires investing in multiple funds across fund managers, asset classes (e.g., equity, debt, real estate, infrastructure), and vintages (i.e., fund timings).

Assuming a minimum investment of $5 million per fund, a portfolio of 10 funds would require $50 million in total commitments (see figure 1). Targeting a 20% allocation to Private Markets, this would imply a necessary total wealth of approximately $250 million. This combination of high minimums and the need for broad diversification makes traditional Private Markets access inaccessible to most individuals – unless access is pooled through feeder vehicles or other democratized structures.

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2.   Fund selection challenges and information gaps

Private Markets lack the standardized data and benchmark availability seen in public markets. This makes it difficult for individual investors to assess fund performance, evaluate team track records, consider risk implications, or compare fees over the investment horizon. This challenge is amplified by the wide dispersion in returns among Private Markets fund managers (see figure 2). The gap between top- and bottom-quartile performance is particularly pronounced in popular segments such as Europe Buyout – underscoring the importance of rigorous fund selection.

While Private Markets offer the potential for superior returns, this upside is conditional on identifying and accessing top-tier managers. Without the benefit of experience or institutional-grade due diligence tools, this reflects a significant hurdle for individual investors. In the end, access alone is not enough – capturing the full value proposition of Private Markets depends on selecting the right funds.

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3.   Operational complexity: Hidden frictions in Private Markets

Even for those who meet the minimum investment thresholds, operational complexity remains substantial when investing in Private Markets. Legal documents, such as subscription agreements and private placement memoranda, often exceed 300 pages, and onboarding includes extensive paperwork, investor identification checks, and coordination with fund administrators.

Moreover, contrary to public markets, Private Markets investments have traditionally not been "bankable" (i.e., visible in investors’ securities accounts) - they are often held off-platform through legal entities such as limited partnerships or feeder vehicles. As a result, they can’t be easily transferred, consolidated, or monitored within a standard brokerage platform. This, in turn, substantially complicates portfolio management, reporting, and investors’ visibility on their assets.

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4.   Illiquidity and long lock-up periods

Traditional Private Markets funds typically follow a 10-year lifecycle, where committed capital is deployed over the investment period (e.g., for acquisitions of companies) and returned to investors during the harvest period (e.g., enabled by the sale of companies). Early liquidity is rare as cash distributions often do not begin until year 4 or 5. This dynamic gives rise to the so-called "J-Curve": a period of negative cash flows early in the fund’s life, followed by gradually growing cash distributions as investments are exited (see figure 3).

The illiquid nature of Private Markets is both a defining feature and a key driver to their historical outperformance. However, this same illiquidity remains one of the biggest barriers for private investors. In practical terms, investor capital is locked up for years. Any unexpected liquidity needs can therefore create challenges for investors, since exiting these investments prematurely is often not possible or highly arduous.

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That said, illiquidity can also serve as a behavioral advantage. It removes the temptation to react to short-term market swings and helps investors stay committed through cycles. Still, it requires trust in the fund manager and a long-term mindset of eligible investors. These barriers help explain why most private investors have historically remained under-allocated to Private Markets. Institutional investors, however, have established rigid, professional processes to overcome and manage these hurdles, explaining the substantial Private Markets allocation gap highlighted in episode 3 of our series.

The good news for private investors? In recent years, the industry has increasingly begun to recognize and address these barriers, and there is an accelerating trend to broaden access to Private Markets for private investors in a responsible and effective way.

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Up next: Overcoming Private Markets barriers with iAccess Partners

In our next episode, we will introduce how iAccess Partners is helping qualified individual investors and their advisers (banks, wealth managers, family offices, etc.) overcome these traditional barriers – through a platform built specifically for private wealth’s access to Private Markets.

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Interested to learn more? Discuss Private Markets with iAccess Partners

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