\Private markets are entering a new growth phase, as strong investor demand and expanded access for retail investors reshape how capital is raised, structured, and distributed, according to new research by State Street Corporation.
The fifth annual Private Markets Study from State Street, titled “Resilience Meets Opportunity,” shows that demand in private markets remains exceptionally resilient, even against a backdrop of geopolitical uncertainty, inflationary pressures, and market volatility. Only 7% of firms expect to reduce their allocations, while half plan to increase their exposure, reinforcing the role of private markets as an essential component in long-term portfolio construction.
Retail Participation
At the same time, the sector is undergoing a structural shift toward retail investor participation as firms broaden access through wealth management channels. Specifically, more than 84% of asset and wealth managers already offer or plan to offer private market strategies to retail investors, demonstrating that retail access has moved from a long-term ambition to a core component of industry strategy.
“The private markets story is defined by resilience on one side and reinvention on the other. Demand remains strong, but bringing private markets to a broader investor base at scale is fundamentally reshaping how the industry operates. Success will depend on who can manage complexity and deliver consistent results to a much broader set of clients,” explains Joerg Ambrosius, President of Investment Services at State Street.
According to the firm, while expanding access to retail investors remains the primary opportunity, firms are taking a more measured approach regarding the pace of growth. The report notes that around 43% of organizations now expect retail-oriented vehicles to account for at least half of private market fundraising within the next three years (down from 56% in the previous year’s survey), reflecting a more realistic view of distribution and operational challenges. Demand is driven mainly by diversification and return potential, as well as access to key investment themes.
Capital Allocation Trends
The study also points to a clear shift in where capital is directed. Findings indicate that artificial intelligence and AI infrastructure rank as the top investment theme globally, underscoring the role of private markets in financing long-term structural growth across economies.
“Even in a more uncertain environment, private markets are increasingly where investors access the most important long-term growth trends, serving as a critical source of return and diversification. AI, infrastructure, and other structural opportunities are reinforcing the role of this asset class as a core allocation in portfolios. Firms will need to keep adapting to meet demand from a broader range of investors,” comments Donna Milrod, Chief Product Officer at State Street.
As firms scale their private market strategies toward retail investors, operational complexity emerges as the ultimate hurdle while asset and wealth managers adapt to serve a larger, more diverse client base. In this regard, nearly eight out of ten respondents cite liquidity management as a key challenge, with specific pain points including redemption management, cash forecasting, and liquidity stress testing as firms adjust to more dynamic investor flows. Regulatory compliance, reporting, and investor servicing are also intensifying as firms expand beyond their institutional client bases.
“Democratization is raising the bar for how private markets are structured and supported. Delivering these strategies at scale requires more than product innovation. It demands the operational, data, and infrastructure capabilities needed to deliver transparency, manage liquidity, and meet the expectations of a very different investor base,” clarifies Scott Carpenter, Global Head of Alternatives at State Street.
The Distribution Channel
The study highlights a clear consensus on distribution: wealth management platforms are viewed as the primary channel to access private markets, whereas defined contribution structures remain a secondary route for most firms. According to State Street, this reflects both investor suitability considerations and the role of financial advisors in navigating more complex investment structures.
Furthermore, the survey reveals that institutional investor demand for private markets remains remarkably resilient despite ongoing market and geopolitical uncertainty. “Demand is driven primarily by return expectations and diversification benefits, reinforcing the role of private markets as an essential allocation in long-term portfolio construction,” the report notes.
Taken together, the findings point to an industry entering a more demanding phase where growth, resilience, and innovation must be matched with operational discipline and scalability. Private markets are no longer defined solely by access. Instead, competitive advantage is shifting toward firms that can offer agile liquidity frameworks, transparency, and performance at scale.
