The sector wants to open up to individual investors, with the promise of giving them access to incredible returns. And thus emerge from the crisis which has paralyzed it since the rise in post-Covid interest rates.
THE private equityor private equity, has long been the preserve of institutional investors, namely pension funds, banks, financial companies, trust funds and ultra-high net worth individuals. Unlike individuals, these professionals are in fact equipped with solid financial knowledge, and capable of managing the risks and lack of liquidity inherent to long-term investments in private markets.
But things could soon change. American and European regulators are in fact considering making private equity accessible to individual investors, a historic change which would disrupt the functioning of the markets and arouse as much fear as enthusiasm.
Reforms planned in the United States and Europe
In the United States, it was one of Donald Trump’s campaign promisesof which private equity has largely financed the 2024 campaign. Paul Atkins, the head of the SEC, the policeman of the financial markets, appointed by the American president, made this idea one of his war horses. Several projects have been opened with this in mind. On the legislative side, the House of Representatives passed the Equal Opportunity for All Investors Act in July 2025. He proposes the creation by the SEC of a financial education test, which would allow any individual capable of passing it, regardless of their wealth and qualifications, to obtain the status of accredited investor, and therefore access private equity. The text must still pass the Senate, where the Republicans have a majority.
On the executive side, Donald Trump signed an executive order in August 2025 ordering the SEC and the Department of Labor to remove regulatory barriers preventing 401(k)-type retirement savings plans from including private equity, opening the door to the redirection of billions of dollars of popular savings towards it.
The SEC, for its part, published a report in September 2025 recommending reviewing the definition of accredited investor to include skill criteria (financial diplomas, professional licenses) rather than simple wealth thresholds. It must put in place proposals in this direction during the year.
On the European side, Retail Investment Strategya legislative package on which the EU Parliament and Council reached an agreement at the end of 2025, also plans to relax the rules allowing an individual investor to obtain professional status. It should come into force later this year and no later than 2027.
A win-win bet?
The prospect is something to tempt individuals. Private equity funds indeed offer returns of around 15%where those of the S&P 500, one of the most popular indices, are around 10%. The promise is simple: invest like the 1%, overcoming the barriers that until now allowed individuals to take advantage of the best opportunities on the market.
On the industry side, it would make it possible, in a difficult economic period, to unlock access to billions of dollars or euros for individuals, from which private equity funds currently do not benefit. The subject is particularly hot in Europe, where the weakness of capital markets is often cited as one of the major obstacles to the development of the most mature start-ups on the Old Continent, pushing the most promising young shoots to to expatriate in the United States, and therefore to create wealth and jobs locally rather than in Europe.
A way to offload on individual investors?
But for private equity, opening up to individual investors constitutes a way out of a slump in which the industry has been stuck since the rise in post-Covid interest rates in 2022. Private equity funds have invested massively in companies benefiting from artificially inflated valuations thanks to the boom years of Covid and very low interest rates, and now find themselves stuck with a large number of companies in their portfolio which continue to delay their IPO, depriving them of their juicy returns on investment, and therefore of their ability to generate profit. cash to continue investing and keeping the machine running.
As long as the economic situation does not improve, their entire model is called into question. Investors were banking on an economic improvement in 2026 which would allow us to escape this vicious circle, but the war in Iran and the energy crisis it caused have dashed this hope. In this context, accessing a new cash reserve would constitute an elegant way out for the industry.
This strategy has sparked criticism from certain experts in financial circles, such as columnist Simon Nixon, who on his Substack accuses the private equity industry of wanting to abuse the trust of individual investors. “The risks for small investors are obvious. For years, the industry has excluded individual investors from large parts of the economy by using debt (often guaranteed on the very assets of the acquired companies) to remove these companies from the public markets. Now, rather than reselling them at a price consistent with their value, the sector is holding them, waiting to sell them to ordinary savers at inflated prices. Said democratization does not broaden access to opportunities: it aims to transfer the burden of losses to other actors,” he believes.
The risk of emptying private equity of its substance
Others see the democratization of private equity as a risky bet that could turn against the industry itself, like Amit Seru, professor of finance at the Stanford Graduate School of Business. “Private capital needs patient, long-term capital, sheltered from the short-term pressures of public markets. Opening the floodgates wide to individual investors would introduce liquidity requirements, shorter investment horizons and an increased level of regulatory scrutiny,” he believes in an article published in the Financial Times.
Paradoxically, the growth of private equity could thus empty it of its specificities, and therefore of its substance, and ultimately sign its downfall. By opening up to individuals, private equity firms will be increasingly regulated and treated like banks, subject to all kinds of controls, regulations, stress tests and liquidity rules. “This could stifle the bold and flexible nature of private equity and lead it to stagnation. Private equity and venture capital drive long-term innovation precisely because they operate outside the strict constraints of banking regulation,” says Amit Seru.
