Why Semi-Liquid Vehicles Could Dominate Private Markets Flows By 2027

For a long time, “democratization” of private markets was more of a panel theme than practical reality. State Street’s 2025 Private Markets Study suggests that is changing quickly. The centre of gravity in fundraising is beginning to tilt away from classic institutional capital toward semi-liquid, retail-style vehicles aimed at individuals and the shift is happening on a one-to-two-year horizon, not a decade-long one.

What the survey actually says

In early 2025, State Street surveyed nearly 500 senior executives across private markets specialist managers, diversified asset managers with private allocations, and institutional asset owners. A majority of respondents (55%) now believe that in as little as two years, at least half of private markets fundraising will come through semi-liquid, retail-style vehicles marketed to individual investors.

This marks a clear shift in expectations versus the previous survey. Then, 51% of respondents thought most private markets fundraising over the next one to two years would continue to be done through traditional institutional channels, with about a third expecting semi-liquid and other individual-investor products to reach parity with institutional fundraising. In the latest study, the share expecting traditional fundraising to dominate has fallen to 39%, while those expecting retail-style vehicles to be the main mechanism has risen from 14% to 22%. At the same time, 56% now say that at least half of flows will come through quasi-retail products in the near future.

In other words, the industry’s own base case is that retail-style structures will sit alongside, and in some cases rival, classic institutional funds as fundraising channels by the middle of the decade.

GPs are more bullish than LPs

The enthusiasm for semi-liquid vehicles is strongest among managers. Only about a third of general partners (36%) still see institutional fundraising maintaining its dominance over the next one to two years, compared with 42% of limited partners.

Around 40% of GPs expect retail-style vehicles to reach parity with traditional fundraising in that timeframe, versus 29% of LPs. Similar proportions of both groups, roughly one in five, anticipate retail-style funds actually becoming the majority source of flows. State Street suggests this gap reflects GPs’ proximity to product development and distribution initiatives aimed at individual investors, as well as their role in designing and managing these new wrappers.

Regionally, Asia-Pacific institutions are most likely to anticipate a balanced mix between institutional and retail-style channels. Respondents from APAC are less likely than their peers in EMEA or the Americas to see traditional fundraising as the dominant route and more likely to predict parity between traditional and semi-liquid vehicles within one to two years.

What actually unlocks democratization

The study is specific about what respondents think has to happen for this “retail revolution” to be sustained rather than theoretical.

When asked about the best levers for driving private-markets democratization, institutions highlighted a mix of bottom-up and top-down factors. Product innovation in the semi-liquid fund space was cited most often (44%), followed by lowering means-based barriers to entry such as wealth and income thresholds (42%). Roughly four in ten respondents pointed to relaxing liquidity rules around underlying assets in retail and defined-contribution funds, and a similar share highlighted more frequent, timely, high-quality data enabled by regulation on underlying companies and real assets. Technology-driven data improvements and digital tokenization or fractionalisation of illiquid assets were also seen as important enablers by around a third and just under that, respectively.

The picture that emerges is not “technology will fix it” or “regulators should fix it” in isolation. Instead, democratization depends on a stack of conditions: regulatory frameworks that allow semi-liquid exposure to private assets; fund structures that can operate within those rules without creating liquidity mismatches; and data and technology infrastructure robust enough to support more frequent dealing and reporting.

State Street also points to specific product innovation already underway, including private-asset ETFs such as its own private credit ETF, positioned as a way to open up investment-grade private credit to a broader investor base via a listed wrapper.

Where retail-style flows are expected to go

At the asset-class level, survey respondents expect the benefits of democratization to be unevenly distributed. Asked which private markets segments are most likely to gain from the trend, 42% pointed to private equity, 25% to private debt, 16% to infrastructure, and 12% to real estate.

Private equity’s advantage is largely demand-driven: respondents cited both strong investor interest and significant provider appetite to bring more PE products to individual investors. Private debt is seen as another major beneficiary, reflecting both demand for yield and the perceived suitability of income-generating strategies for individual portfolios. For infrastructure, respondents highlighted the role of government incentives, while for real estate they pointed to relatively high investor familiarity and understanding of the asset class.

From a wealth-platform perspective, this mix is intuitive: private equity offers the growth and return story, private credit the yield story, infrastructure the policy-backed “essential assets” angle, and real estate the more intuitive, tangible exposure.

Why the shift makes sense and the risks State Street flags

The macro backdrop described in the study helps explain why both institutions and individuals are looking harder at private assets. Following the COVID-19 shock, a period of high inflation and interest rates, and now tariff-driven trade disruption, respondents see private markets as offering a relative edge over public markets in terms of volatility and diversification.

Around 22% of institutions say that lower apparent volatility is a key reason for increasing allocations to private equity, 26% say the same for infrastructure, and 42% for private credit. The report links this to spikes in public-market volatility after new tariff announcements and the ongoing uncertainty around global trade policy.

At the same time, the study is explicit about the risks to retail-style private markets funds in this environment. Two stand out:

• Less frequent valuations do not shield investors from actual economic losses in a prolonged downturn; they simply delay recognition. Vehicles aimed at newer investor cohorts could launch into a weaker environment, experience downward valuation resets, and suffer reputational damage with precisely the audience that democratization is trying to reach.
• Policy attention may shift away from the regulatory changes and data standards that semi-liquid products rely on, if governments and regulators are focused on trade and geopolitical issues. That could slow or complicate the evolution of the frameworks these products need.

The report also notes a political dimension. Governments increasingly view quasi-retail flows into private markets as a way to fund domestic priorities such as infrastructure and strategic industries. That alignment can support the growth of new structures, but it also means product design and disclosure may be influenced by policy objectives as well as investor needs.

What market participants are focusing on

If semi-liquid vehicles are moving from niche to mainstream, the question becomes less “will democratization happen?” and more “how is it implemented?”.

State Street’s analysis points toward several areas of focus for managers, allocators, and regulators:

• Liquidity terms and portfolio design. Semi-liquid products need redemption rules, gates, notice periods, and hard caps that match the liquidity profile of their underlying portfolios. That implies designing strategies expressly for these vehicles, not simply placing traditional closed-end approaches into wrappers that promise more frequent dealing.
• Valuation and governance. The study emphasizes the importance of more frequent, transparent, and high-quality data flows from underlying companies and real assets up to GPs, and from GPs to LPs to support valuation processes that are credible in both normal and stressed markets.
• Data and technology infrastructure. Respondents highlight both regulatory data standards and new technologies, including AI and advanced data-management tools, as key to managing semi-liquid portfolios at scale. The ability to handle unstructured information and produce reliable analytics is presented as central to managing risk in democratized private markets.

Where this leaves the “retail revolution”

The 2025 State Street Private Markets Study does not present democratization as a distant aspiration. A majority of respondents expect semi-liquid, retail-style vehicles to account for at least half of private markets fundraising within about two years, and a rising share see them as the main fundraising mechanism outright.

That does not mean the shift is guaranteed to be smooth, or that all semi-liquid products will look alike. It does mean private markets participants increasingly see individual investors and quasi-retail structures as central to the next phase of growth, rather than as peripheral experiments.

How well that transition works will depend on details that sit beneath the headline numbers: how liquidity is engineered, how assets are valued, how data is managed, and how clearly risks are communicated to a new investor base. The study’s message, taken at face value, is straightforward: flows into retail-style private markets vehicles are coming; the question now is how robust the architecture will be when they arrive at scale.

Brand Manager

Aayushi Thakur

Frequently Asked Questions

Q: What does “semi-liquid” mean in private markets?

A: Semi-liquid vehicles are private-market funds that offer periodic liquidity (for example monthly or quarterly dealing with gates and limits) rather than full daily liquidity or a long lock-up like classic closed-end funds.

Q: Why do industry participants think semi-liquid vehicles will grow so fast?

A: In State Street’s 2025 study, a majority of respondents expect at least half of private-markets fundraising to come through retail-style, semi-liquid products within about two years, driven by demand from individuals, product innovation, and new distribution agreements with wealth platforms.

Q: Which asset classes are expected to benefit most from democratization?

A: Respondents most often point to private equity, followed by private debt, infrastructure, and real estate, reflecting a mix of growth, yield, policy support, and familiarity for individual investors.

Q: What conditions need to be in place for this “retail revolution” to work?

A: The study highlights three big enablers: suitable regulation that allows semi-liquid exposure, fund structures whose liquidity terms match their underlying assets, and data/technology infrastructure good enough to support more frequent valuation and reporting.

Q: What are the main risks that State Street flags?

A: Key risks include valuation lags masking real economic losses in a downturn, the possibility of newer investors experiencing early negative performance in semi-liquid funds, and policy or political objectives influencing how products are designed and sold.

Sources

State Street, 2025 Private Markets Outlook: Driving Success in Volatile Environments