Retail investors’ appetite for alternative assets and the availability of vehicles that make it possible for them to access private markets have grown even more rapidly than anticipated over the past few years, according to the fourth annual State Street Private Markets Study.

Fifty-five percent of respondents to the investor manager’s 2025 survey believe that within one to two years’ time, half of the fundraising for private market assets will come from retail investors. That’s despite recent volatility caused by the current U.S. administration’s tariff policies and other geopolitical risks.

State Street collected the responses from approximately 500 senior executives at top buy-side firms during the first quarter.

In this year’s survey, 22% of respondents said they believe private market fundraising will be weighted toward semi-liquid vehicles geared to retail investors. Another 34% believe fundraising will be weighted equally between semi-liquid and traditional funds. Those numbers went up from 14% and 13% in 2024’s survey, respectively.

However, State Street researchers note that this bullish outlook is driven more by GP sentiment than LP, or client, thinking. Only 29% of LPs believe fundraising will be equally weighed between traditional and semi-liquid vehicles, and 42% believe it will be weighted toward traditional fundraising over the next two years. That’s compared to 40% of GPs who believe fundraising will be weighted equally between both and 36% who believe it will be weighted toward semi-liquid vehicles.

Related:Financial Planners Significantly Ramped Up Alternatives Use In 2025

Financial advisors’ interest in alternative assets and semi-liquid funds rose substantially in recent years as more asset managers started courting the private wealth channel and experimenting with products aimed at individual investors. In 2025, U.S. retail fundraising volume for alternative investments overshot expectations and beat a previous record set in 2022, at $122 billion, according to investment banking firm Robert A. Stanger & Co. However, questions remain about whether private market assets always benefit retail investors who may not be used to dealing with their more complex structures and greater illiquidity.

State Street survey respondents said the best ways to drive the democratization of alternatives, as it has become known, include innovation in the use of semi-liquid products (44%), lowering income-based barriers to entry (42%), relaxing regulations around the liquidity of underlying assets (39%), more frequent and higher quality data requirements from regulators (37%), technologies that enable more access to more frequent and higher quality data (34) and digital tokenization of illiquid assets (28%), among other things.

Related:Q&A: Should Advisors Jump on Public/Private Fund Offerings?

“How many times in the past has ‘lowering financial barriers to entry and relaxing regulations surrounding liquidity’ turned out to be a good thing for the average mass affluent (retail) investor?” asked T. Neil Bathon, managing partner with FUSE Research Network, in an email. “We know this lower group of retail investors will react in an emotional and/or erratic way at the first signs of trouble (see the Blackstone BREIT fund) as a case study. Many outlets suggest that more/better education will make this less of a problem but—at least for retail investors—that is not going to change anything. Blackstone probably has done more than just about anyone in terms of time and money spent on education and yet, the advisors, and their clients reacted poorly to the gates being put in place in terms of redemptions.”

Given the limited liquidity and longer timelines required to reap worthwhile returns from alternative investments, the client segment that will benefit the most from these types of allocations is high-net-worth and ultra-high-net-worth investors. But Bathon said those clients have already been investing in alternatives for years.

Related:Wall Street’s Love for Alternative Assets Isn’t a Good Deal for Clients, Expert Warns

“Having said all of this—retail investors are likely to receive a significantly ‘watered down’ version of alts offerings that will be packaged in an interval fund structure (or an ETF or maybe even a CIT) for which the investor qualifications are already much lower … as are the fees in most cases,” he added.

According to the State Street survey, the asset class that’s most likely to benefit from the democratization of alternatives is private equity, with 42% of respondents picking it. Private debt came in a distant second, at 25%, with infrastructure third, at 16%. Only 12% of investors said real estate was the most likely to benefit from the trend, putting it in fourth place. Another 5% of respondents were unsure about which asset class stands to benefit the most.

Respondents said private equity is the most suitable investment type for retail access because it combines high demand from individual investors (53%) with more managers offering it to the private wealth channel (48%) and a relatively high level of individual investors understanding this asset class (43%), among other factors.

Real estate boasts the highest level of individual investor understanding in respondents’ view (60% of respondents felt this market segment well understands it), and the most investors already accessing it (45%). However, there is a perception that far fewer asset managers are offering real estate to the retail channel (31%). Private debt and infrastructure currently sit somewhere in the middle between private equity and real estate.

The global survey was conducted in the first quarter of 2025 by CoreData on behalf of State Street. Respondents included private markets specialist managers, generalist asset managers with private market portfolios and institutional asset owners.