Singapore expands retail access to private markets

[SINGAPORE] Singapore is poised for a major shift in its investment landscape as regulators consider opening private markets-long the preserve of institutions and the wealthy-to retail investors. The Monetary Authority of Singapore (MAS) has launched a public consultation on a framework that could soon allow everyday investors access to private equity, private credit, and infrastructure funds, promising higher returns but also introducing new risks and complexities.

Private Markets: From Exclusive to Inclusive

For decades, private market investments such as private equity, private credit, and infrastructure have been largely out of reach for retail investors in Singapore. These asset classes, known for their illiquidity and complexity, have typically been reserved for accredited investors-those with at least S$2 million in net personal assets or an annual income of S$300,000.

This is set to change. Responding to rising demand from retail investors and industry players, MAS has proposed a regulatory framework that would allow retail participation in private market funds through newly authorized long-term investment funds (LIFs). The move mirrors global trends, with similar initiatives gaining traction in the US, UK, and Europe.

Why the Push? Higher Returns and Diversification

The appeal of private markets is clear: the potential for higher returns and portfolio diversification. Recent research highlights that private equity funds have outperformed public equities by an average of 1,079 basis points per vintage year, while private credit has beaten public leveraged loans by 625 basis points. With global private market assets projected to grow from US$13 trillion in 2023 to over US$20 trillion by 2030, retail investors are eager to tap into this expanding universe.

“You invest in the real economy and you can really target your investment strategies to very specific companies or infrastructure projects,” said Eric Deram, CEO of Flexstone Partners.

The Proposed Framework: How Retail Investors Could Participate

Under the MAS proposal, retail investors would gain access to private markets via two main fund structures:

Direct Funds: Singapore-constituted funds making direct private market investments, offering greater transparency into underlying assets.

Long-Term Investment Fund-of-Funds (LIFFs): Funds that invest in a diversified portfolio of other private market funds, leveraging the expertise of professional managers.

Both structures aim to balance accessibility with investor protection. MAS is considering annual redemption opportunities for these funds, subject to limits, to address the illiquidity inherent in private assets.

Safeguards and Challenges

While the potential benefits are significant, regulators and industry experts caution that retail access to private markets must be carefully managed. Key concerns include:

Higher Fees: Private market funds typically charge higher fees than traditional mutual funds, impacting net returns for retail investor.

Limited Liquidity: Unlike publicly traded assets, private market investments often require long holding periods, with limited opportunities for early exit.

Transparency and Valuation: The complexity and infrequent valuation of private assets can obscure risks and make it difficult for investors to assess performance.

Investor Suitability: Retail investors may lack the experience or risk tolerance required for these complex products, necessitating robust financial advisory processes and clear disclosures.

MAS is seeking public feedback on these issues, with the consultation period open until May 26, 2025.

Industry Response and Global Context

The proposal has been broadly welcomed by market participants, who see it as a necessary evolution in Singapore’s investment landscape. Asset managers and digital wealth platforms are preparing to launch new products tailored to the mass affluent segment-defined as individuals with US$100,000 to US$1 million in investable asset.

Azalea Investment Management, a Temasek Group company, has already pioneered retail access to private equity-backed bonds through its Astrea series, raising US$3.6 billion over the past decade, including nearly S$1.3 billion from retail investors. Azalea’s next ambition is to enable direct co-investing in private equity portfolios for a broader audience.

Globally, regulators are grappling with similar questions. The US Securities and Exchange Commission recently approved private market exchange-traded funds, while Europe has revamped its Long-Term Investment Fund framework to boost retail access.

What’s Next?

If implemented, the MAS framework could democratize access to private markets, allowing Singapore’s retail investors to diversify their portfolios and potentially enhance returns. However, the devil will be in the details: ensuring that products are marketed responsibly, risks are clearly communicated, and investor protections are robust.

As the consultation process unfolds, MAS and industry stakeholders will need to strike a delicate balance-expanding opportunity while safeguarding the interests of less experienced investors.