Private-markets access for retail investors is mostly good – but with caveats

[SINGAPORE] Allowing retail investors to allocate to private-market funds is surely a good thing. Higher returns are sorely needed for retirement portfolios.

But it warrants caution as well. The devil is in the details – in the policing of the funds’ marketing, disclosures and practices. And, there is the financial advisory process, which is crucial to a well-informed decision. Advisers would be giving recommendations on a complex asset with higher fees – which could be a potentially lucrative revenue stream. They must be held to a higher bar when advising on such assets.

On Mar 27, the Monetary Authority of Singapore (MAS) published a paper seeking feedback on a regulatory framework to allow private-market fund investments for retail investors. Access is currently limited to accredited investors, defined as those with net personal assets of more than S$2 million, or an annual income of S$300,000.

Singapore isn’t unique in restricting access to private assets; most other jurisdictions do so as well. Regulators believe that more investor protection is needed for retail investors, due to private assets’ illiquidity, lack of transparency on underlying holdings, conflicts of interest, infrequent valuations and higher leverage, among others.

But this is changing rapidly. The US Securities and Exchange Commission (SEC) last year green-lit the listing of private-market exchange-traded funds (ETFs). In February, State Street Global Advisors’ (SSGA) private credit ETF debuted on the New York Stock Exchange – but not without a hiccup, which I’ll get to later. Others with plans for retail access include BlackRock and the Capital Group.