SEC panel says regular investors should have access to private equity
Six years ago the Securities and Exchange Commission focuses on private equity for commercial real estate and what it saw as a lack of disclosure of transactions between PE funds and their business partners. Today the climate is changing, at least in terms of investment opportunities.
Even if CRE will feel an impact shortly SEC climate protection regulations, an advisory board says the agency should allow ordinary investors to put money into private equity, the agency reported Wall Street Journal.
The Asset Management Advisory Board approved a report Accordingly, the SEC should “consider giving so-called retail investors access to a wider range of private investments.” The reasons are supply and demand. There is “a more concentrated range of public equity choices,” which is a more difficult and expensive path for most people asking for more investment opportunities.
Traditionally, private equity and other types of non-public marketplaces have only been available to institutional and corporate investments and accredited investors: individuals with high minimum net worths who suspect greater financial literacy.
But the SEC was on its way to giving retail investors options. In 2020, Dalia Blass, director of the SEC’s Investment Management Division, said “Main Street investors have been made ‘outside-in’ because of defined contribution plans” [like 401(k)s] did not allow access to private investments such as private equity, hedge funds and real estate ”, said a Financial Times report.
As the Wall Street Journal Remarks, the Asset Management Advisory Committee consists of “representatives of asset management companies – including private investors, public pension plans, auditing and advisory firms, and other types of institutions”.
It is unclear how this could affect commercial real estate.
“There’s already a lot of dry powder in the real estate space, and this will only add to that, adding additional profit hunting, downward pressure on yields and style variance,” FTI Consulting’s Josh Wilcox told GlobeSt.com. He also points out that real estate is “already a more illiquid and opaque asset class” than retail investors are used to, and more money could increase risk.
Hameer Vaid, Senior Director of Alvarez & Marsal’s Private Equity Performance Improvement Group, believes that private investors can already participate in these markets. “The formation of REITs across debt and equity structures has increased over the past decade and offers private investors significant opportunities to leverage real estate investments while keeping the level of risk low,” he says.
There is also the development of part ownership, including the use of Crypto technology, which over time could allow more people to participate in the returns on significant real estate, and offers the choices that the SEC report calls for.