Expanding Access to Private Markets
Institutions, college endowments, pension funds, and affluent investors have long invested in private markets and benefited from stable, strong returns. Yet, the middle class has largely been boxed out from these wealth-generating opportunities.
Expanding access to private markets is central to ICI’s vision to modernize the Investment Company Act of 1940.
Key Takeaways
- Asset classes like private equity shouldn’t be walled off from retail investors saving for a more secure future.
- Regulated funds are the natural bridge for safely integrating retail investors into private markets. They are the ideal wrapper because they must follow strict legal requirements that include oversight from an independent board, limitations on leverage and transactions with affiliates, among other built-in protections.
- More fund managers should be allowed to invest in private markets, tailoring funds to investors’ financial goals.
- ICI advocates for regulatory reforms and policies that open private markets to a broader range of investors.
Private markets have experienced exponential growth over the past decade, filling the gap left by a contracting public market and fostering capital formation in the U.S.
These markets are the next frontier, full of boundless opportunities for Americans who want to save for a home, their children’s education, and their retirement. Our goal, and our job, is to help them seize those opportunities, so they can achieve their American Dream.
That’s why ICI encourages Congress, the SEC, and the Department of Labor to take concrete steps that would provide retail investors with greater private markets exposure, including:
- lifting the 15 percent limit on alternative investments by retail-facing closed-end funds (CEFs);
- updating the conditions for co-investment by regulated funds, including CEFs and business development companies;
- expanding investment options for CEFs; and
- increasing the availability of private markets strategies in retirement plans such as 401(k)s.
We support the Trump Administration’s executive order encouraging increased access to private equity investments in retirement plans. We also strongly support the Increasing Investor Opportunities Act, which would allow SEC-regulated, retail CEFs (included in some employer-sponsored retirement plans) to invest in private funds. The bipartisan legislation, which passed through committee in the House, would also close a loophole that has allowed activist investors to take over listed CEFs to force them into liquidity events or radically change their investment strategy.
By curtailing harmful activist activity, the Increasing Investor Opportunities Act would:
- encourage fund sponsors to offer listed CEFs; and
- give retail investors the opportunity to invest in private markets by way of a regulated, transparent, and proven investment vehicle with strong fiduciary requirements and consistent dividends.
ICI supports expanding retail investor access to private funds and facilitating the inclusion of private funds in retirement plans.
