“Is private equity ready for a retail revolution?” Private Equity International asks in a Special Report on The Future of Private Equity. The feature discusses how an influx of retail capital could change the future of private equity, including both growth opportunities and operational implications. The article includes insights from asset management partner Michael Doherty and benefits partner Josh Lichtenstein.
“If the SEC can find a way to give 401(k) retirement money access to private equity, that would mean a significant influx of capital,” Mike states in the piece, noting how Ropes & Gray—led by Mike—has been in discussions with SEC staff to determine how market liberalisation could take effect. “Selling to retail investors is not just about having an attractive product, it’s about ensuring you have the right sales channels that have access to those retail clients,” Mike highlights. “Getting your products on those platforms can be a lot of work and very expensive. However, one possibility is to partner with someone who already has that distribution capability rather than build your own.”
However, Josh cautions that “There has been a high rate of lawsuits brought against 401(k) plans based on investment selection and, in particular, the inclusion of funds with high fees,” noting “One thing that we have heard is that the Department of Labor is actively considering making it clear that fiduciary duties governing options offered to private participants require consideration of more than just fees. The hope is that a regulatory change could stem the tide of lawsuits and provide a clearer roadmap for plan fiduciaries as they go about deciding how to offer products like private equity.”
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