How to navigate liquidity and leverage in the retail rush: with opportunity comes responsibility

By Robin Harris, Head of APAC at Ocorian

The private equity industry is facing a fundamental shift. As institutional investors hesitate to commit further capital due to the slowdown in exits, GPs are increasingly looking to a new frontier: retail investors.

With the rise of evergreen funds and platforms designed to give individuals access to private markets, the democratisation of private equity is gaining momentum.

But this new chapter brings with it familiar risks; ones that industry veterans and regulators alike must not overlook.

The challenge behind the curtain

Traditionally, private equity has thrived on a small number of large institutional investors with deep pockets and long investment horizons.

However, the recent slowdown in capital recycling – few exits and slower distributions – has left many LPs fully allocated and unable to re-up. Our new research* amongst senior executives managing over $335 billion in assets, reveals that nearly two-thirds (62%) of North American private equity and venture capital firms are experiencing delays to their fund exit timelines, with 21% reporting significant delays stretching into 2026 or beyond. The primary culprits? Portfolio companies not yet being exit-ready (69%), valuation mismatches (60%), and regulatory hurdles (59%). With just 8% accelerating exits, the capital bottleneck is clear – leaving LPs waiting longer for returns and funds increasingly reliant on alternative liquidity strategies such as secondaries and continuation vehicles.

Rather than raising vast sums of new capital, some GPs are now turning to retail capital to offload existing holdings at high valuations, helping to manage the backlog on their books.

At the heart of this retail evolution are evergreen fund structures. These are vehicles designed to provide liquidity and attract a broader investor base. Yet, therein lies the paradox: offering liquidity for inherently illiquid assets. These funds work, until they don’t.

Liquidity: A fragile illusion

The reality is simple. Liquidity can only ever be as robust as the underlying asset. In times of market stress, the promise of redemption can quickly give way to gating provisions and frozen funds. We've seen this story before.

The UK’s well-documented Woodford fund controversy is a case in point. Retail investors found themselves unable to exit after the fund’s illiquid asset mix caused severe liquidity constraints. Listed property funds, which suffered similar fates during volatile periods, serve as further evidence: structures built for smooth sailing may not withstand a storm.

We are now seeing similar evergreen structures being greenlit across global financial centres. The direction of travel is clear, and not necessarily unwise. But it comes with a critical caveat.

Leverage: The hidden risk

Another factor often overlooked in the democratisation debate is leverage. Despite its name, much of private equity is less about equity and more about debt. These are highly levered investments, and that leverage – when combined with illiquidity – can amplify losses in stressed conditions.

The retail push should not simply be about opening doors. It must be about responsible access.

A call for transparency

At Ocorian, we support the principle of broader investor inclusion. Private markets can offer diversification and long-term returns. But as the industry pivots towards retail, transparency and investor protection must remain paramount.

Regulators are rightly scrutinising the liquidity and leverage dynamics of these new structures. Fund managers, for their part, must be clear in their prospectuses about the risks involved – no matter how attractive the marketing headline may be. Evergreen doesn’t mean ever safe.

The burden of communication and reporting is also rising. Retail investors expect more commentary, more granularity, and more frequent updates. As a result, many private equity managers are now hiring wealth management professionals or implementing dedicated reporting platforms to meet these new demands.

Building the right infrastructure

We are already seeing the emergence of platforms like Moonfare and Wealth Club that act as intermediaries pooling retail capital into feeder funds that meet the minimum cheque sizes of large private equity firms. These platforms are helping bridge the gap, but their success depends on robust operational infrastructure and transparent investor communication.

At Ocorian, we support the ecosystem with fund establishment, SPV structuring, regulatory advice, and investor onboarding services. While we don’t directly manage retail-facing reporting obligations, we partner closely with clients who do. And we see the critical role that operational integrity plays in enabling this new chapter of private capital growth.

Responsible democratisation

The push to democratise private equity should be welcomed but it must be accompanied by honest conversations about liquidity, leverage, and risk. Retail investors deserve access, but they also deserve clarity.

As this evolution continues, fund managers must ensure they are not only meeting regulatory obligations but also building the trust and transparency that this new cohort of investors demands.

The opportunity is real. But so is the responsibility.

* In May 2025 Ocorian commissioned independent research company PureProfile to interview 100 senior venture capital and mid-market private equity professionals in the US and Canada working for firms with $335.25 billion assets under management