Opening Private Equity to Retail Investors? Don’t Do It.

From: Edward Waitzer and Rachel Wasserman
To: Private equity watchers
Date: March 20, 2026 
Re: Opening Private Equity to Retail Investors? Don’t Do It. 

A priority project for the Ontario Securities Commission currently is to give smaller investors easier access to private assets (including private equity investments). This is consistent with Donald Trump’s recent executive order directing the US Securities and Exchange Commission and Department of Labor to facilitate access to private equity by retail retirement savings accounts. 

The OSC describes its project as a “forward-looking initiative that will benefit both retail investors and the broader capital markets.” 

That is incorrect.

Private markets are opaque by design. The market attracts sophisticated “insiders” who negotiate pricing, governance and other terms based on the leverage they have as capital suppliers. The ecosystem isn’t designed for, or compatible with, the transparency that retail investors enjoy in public markets, and the false mystique of limited access is only a marketing pitch. 

For starters, the narrative that retail investors are unfairly excluded from superior investment opportunities doesn’t hold up. Private equity is now underperforming an S&P index fund on results over one-, five- and 10-year periods. 

Nor is access currently a problem. In Ontario, retail investors can already access private equity through public vehicles (subject to the full discipline of securities regulation), or through the existing “accredited investor” exemption (which sets a relatively low bar for accessing investment products that are not subject to the full panoply of securities laws). 

Absent evidence of retail investor demand (which the OSC hasn’t proffered) what is the problem the OSC is trying to solve? 

Public markets provide retail investors with transparency, liquidity, market regulation and the ability to index at minimal cost. In contrast, private equity depends on high fees, illiquidity, limited transparency or regulation. 

If private equity has ample access to capital, retail investment at scale will increase the costs of investment opportunities. If private equity is bumping up against capital raising constraints, retail access is like waving a red flag in front of a bull – with funds offloading investments to unsophisticated players, allowing fund managers to collect hefty fees on the transaction. 

The opportunity for conflicts of interest should be of concern. It’s no coincidence that access for retail investors is being advanced, at the political level, just as sophisticated institutional investors are reducing their positions. 

The chief investment officer of the Yale University endowment, historically one of private equity’s biggest champions, has said that “[Private equity] is not nearly as attractive as it was five, 10 or 15 years ago” in response to the endowment selling off a material portion of its private market allocations last year. 

Nor is it clear why successful private equity players would welcome retail players, who will likely undermine the sector’s competitive advantages by attracting increased litigation, regulation and public scrutiny for precisely the reasons just described. 

This isn’t to deny that private equity serves a useful role in improving the governance and performance of companies and markets. Private equity concentrates the rewards of ownership in management more than is the case in public markets. 

This fosters medium-term (monetary) value creation free from the constraints of public markets. The question is whether regulatory encouragement of increased retail participation will enhance or diminish that role. Perhaps more importantly, the OSC’s statutory mandate is investor protection and market efficiency. 

It is far from evident that encouraging retail access to private equity is a sound way for regulators to protect investors, facilitate the efficient allocation of retail savings and ensure public confidence in Ontario’s capital markets. 

Why then this push for regulatory reform? Perhaps the focus is less on democratizing smaller retail investor access to private markets and more on enabling those who raise capital in private markets to more easily access previously untapped capital? It is not hard to forecast how that will play out. 

Opening private equity to retail investors is likely to drive up costs, drive down returns, increase market fragility through liquidity mismatches, invite abusive transactions and, as a result, create reactive regulatory constraints and costs that private equity has long sought to avoid. 

The primary beneficiaries will be private asset managers and intermediaries, while the costs will be borne by less sophisticated retail and institutional investors and the economy, including the reputation of our securities regulators. 

Edward Waitzer, a former chair of the Ontario Securities Commission, is a senior fellow at the C.D. Howe Institute and Rachel Wasserman is the founder of Wasserman Business Law and a fellow at Social Capital Partners and the Canadian Anti-Monopoly Project. 

To send a comment or leave feedback, email us at blog@cdhowe.org. 

The views expressed here are those of the authors. The C.D. Howe Institute does not take corporate positions on policy matters. 

A version of this Memo first appeared in The Globe and Mail.