Africa – The potential of private market investments for wealth creation and financial inclusion is significant, yet retail investors often face barriers in accessing these opportunities.

According to World Economic Forum, A recent report highlights the need for broader access and education in the world of alternative asset classes.

Challenges in Retail Investor Access

Retail investors currently have limited exposure to alternative asset classes like private equity, private credit, real estate, and infrastructure, unlike institutional investors. This lack of access is attributed to several factors, including a lack of education about these asset classes, stringent regulations, high investment minimums, and liquidity constraints.

Growth and Potential of Private Markets

The private market has seen a ten-fold increase in assets under management over the past two decades, rising from approximately $1.3 trillion in 2005 to about $13 trillion in 2022. These asset classes have become popular due to their potential for higher returns and diversification benefits, as evidenced by data from Preqin and analysis by J.P. Morgan.

Strategies for Inclusion

To make private markets more accessible to retail investors, several steps can be taken:

Financial advisors should enhance investor education, backed by better training and product knowledge, while considering risk and suitability.

Policymakers are urged to refine the definition of accredited investors to be less restrictive, allowing financially literate or sophisticated individuals to invest.

Investment product creators should aim to tailor existing products or develop new ones with reduced minimums and increased liquidity.

The industry should work towards standardizing products or reporting structures for easier comprehension and comparability.

The report, produced in collaboration with Accenture and the World Economic Forum, emphasizes that with appropriate guardrails, private markets can offer shared access to lucrative asset classes, fostering wealth creation for retail investors and contributing to long-term economic growth.