- The SEC is considering relaxing rules for retail investors in private asset funds.
- Private funds have grown significantly, from $9.5 trillion in 2012 to $30.9 trillion in 2024.
- Tokenization could lower barriers to private market investing by allowing fractional ownership.
- Major firms like Apollo Global and Hamilton Lane are moving toward tokenized fund structures for efficiency.
- Expanded retail access is expected to support the adoption of tokenization technologies in financial markets.
Paul Atkins, the new Chair of the Securities and Exchange Commission (SEC), has proposed changes to make it easier for retail investors to invest in closed end funds that hold private assets, such as hedge funds and private equity. The proposed adjustments were discussed in a recent speech, highlighting a shift in the SEC’s approach under the new administration.
Current rules limit most retail investors by setting a $25,000 minimum investment in these funds. According to the SEC, the private fund market expanded from $9.5 trillion in 2012 to $30.9 trillion in 2024. Commissioner Uyeda previously addressed this issue, suggesting that a diversified portfolio could help manage risks for retail investors. He repeated his view in a recent speech.
“This common-sense approach will give all investors the ability to seek exposure to a growing and important asset class, while still providing the investor protections afforded to registered funds,” said Chair Atkins. Other regulators, such as the Monetary Authority of Singapore, are also exploring similar changes for retail participation in private markets.
The discussion comes as interest in the tokenization of private assets grows. Tokenization uses digital tokens to represent ownership shares, making it possible to divide and trade small portions of large investments. A mid-2024 State Street survey of 300 institutions found that 64% see private equity as the most likely asset class to undergo tokenization, with 50% selecting private credit. Tokenization can reduce minimum investment amounts, giving more investors access to previously exclusive opportunities.
A separate Bank of America survey reported that younger investors between ages 21 and 43 are more likely to invest in alternative assets, with 17% favoring them over cryptocurrencies, which drew 14%. This trend supports the move toward greater retail access.
Operationally, tokenization can streamline fund management, especially as more firms consider handling thousands of smaller investors. For firms like Blackstone and KKR, managing large numbers of accounts poses challenges. Tokenized structures can automate processes such as compliance and distributing returns, reducing the need for intermediaries. Major market players including Apollo Global (assets under management: $781 billion) and Hamilton Lane ($956 billion) have started to adopt tokenized systems for these reasons.
Overall, while the details of new SEC rules remain to be seen, broader retail access and interest in tokenization are likely to shape the way private market assets are offered in the United States.
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