Big developments are happening in private markets today.
This comes amid widespread industry disruption caused by retailisation, growing product innovation and regulation. If fund managers are to adapt, then they will need to engage with forward-looking asset servicing partners, as Lloyd Collier, Senior Director, ICS UK & Ireland, JTC Group, explains.
Managers turn on the retail investor charm offensive
Private market managers are expanding beyond institutional investors to tap into the lucrative retail segment.
Bain & Company calculates worldwide assets total somewhere between $275 trillion – $295 trillion, with retail investors sitting on roughly half of that, yet they account for just 16% of the assets under management (AUM) controlled by alternative investment funds. [1]
In order to appeal to retail investors, firms are shifting from traditional private equity/debt models to semi-liquid or open-ended evergreen fund structures, which offer lower minimum investments and more flexible redemption terms.
In Europe, regulators are trying to encourage more retail investment into semi-liquid funds.
The European Long Term Investment Fund (ELTIF) regulations have been revised to remove minimum investment requirements, boosting assets under management from €2.4 billion [2] in 2021 to €13.6 billion [3].
Optimists predict this could rise to between €30 billion by 2026 [4] and €50 billion by 2028 [5].
While Luxembourg remains the most popular domicile for ELTIFs, Ireland is seeing more activity, with three ELTIFs launched in the country this year. [6]
Across the Channel, the UK is also developing its own home-grown semi-liquid fund structure – the Long Term Asset Fund (LTAF). Although LTAF assets are currently in their infancy, there have been a succession of high-profile launches in 2023 and 2024.
Product innovation sweeps through the private markets
The private markets industry is continuously finding new and exciting ways to extract alpha.
A few years ago, private market firms were bolstering performance by leveraging subscription lines rather than going to Limited Partners (LPs) for capital calls. [7] This helped reduce the administrative burden for General Partners (GPs) and LPs alike, leading to incremental basis point (bp) gains. [8]
More recently a growing number of private market managers are turning to Net Asset Value (NAV) financing – loans secured against the equity value of their underlying fund holdings – to access liquidity, allowing them to deploy capital or fulfil LP distribution obligations more easily.
This pivot towards NAV financing comes as some private market firms have reportedly struggled to access cash, amid the ongoing M&A and IPO drought.
Although subscription lines and NAV financing have obvious benefits, they can be operationally complex, and these need to be managed accordingly.
A market feeling the squeeze
Despite recent successes, the industry faces challenges. McKinsey reports a 22% drop in private market fundraising in 2023[9], with much of this capital flowing to mega funds rather than boutique managers.
Additionally, regulatory pressures are intensifying. AIFMD II, effective from April 2026, will impose stricter rules on liquidity management, delegation, regulatory reporting and the leverage limits imposed on loan originating AIFs[10], all of which will lead to increasing compliance costs for managers , and this in turn will likely be passed on to LPs.
Asset servicers can help shoulder the burden
Asset servicers are well-positioned to help private market managers navigate these changes.
With retailisation becoming more embedded across the industry, GPs are having to digitalise their operational processes, including customer onboardings and reporting, to meet the requirements of technology-savvy retail investors, something which asset servicers can help them with.
At a time when firms are looking to rein in their expenses, outsourcing certain operational activities to asset servicers will help managers move away from a fixed cost base to a floating rate cost structure.
Impact on Ireland
In Ireland, these trends and regulatory changes present both opportunities and challenges for private market managers. The growth in retail investor engagement and product innovations can attract more international funds to Ireland, leveraging its strong regulatory framework and asset servicing capabilities. The changes in the requirements for loan originating funds represent a significant opportunity for Ireland, Inc as these will require all such funds elsewhere in the EU to review and update not only their processes but also their fund documentation, and potentially therefore fund domicile to take advantage of the level playing field.
Administering around $110 billion of fund assets globally, JTC’s fund solutions teams provide a full range of administration services including accounting, and investor reporting services to a diverse range of private funds. Leveraging a provider who has the bandwidth and expertise to service complex fund structures and new, innovative asset classes is an absolute must.
[1] Bain & Company – February 27, 2023 – Why private equity is targeting individual investors
[2] European Parliament – Amending the ELTIF regulation
[3] Scope Explorer – May 15, 2024 – Solid growth in ELTIF market: New regulation to drive further expansion
[4] Scope Explorer – May 15, 2024 – Solid growth in ELTIF market: New regulation to drive further expansion
[5] Private Equity International – November 29, 2023 – ELTIF adoption expected to gather momentum in 2024
[6] Scope Explorer – October 22, 2024 – ELTIFs: new record for launches in 2024 as more asset managers join market
[7] BlackRock – Understanding the impact of subscription lines on private equity funds
[8]BlackRock – Understanding the impact of subscription lines on private equity funds
[9] McKinsey – March 28, 2024 – McKinsey Global Private Markets Review 2024: Private markets in a slower era
[10] Akin – April 12, 2025 – AIFMD II comes into force in April 2024
