For much of the past several decades, private markets were primarily accessed by institutions and high-net-worth investors.
Factors such as high investment minimums, a complex regulatory environment and limited availability often restricted participation by a broader investor base. However, in recent years, new structures and technologies have begun to expand private market access, providing more eligible investors with the opportunity to diversify beyond traditional stocks and bonds.
However, private markets may still come across as complex and fragmented for those new to the space. A variety of investment vehicles exist to access these markets, each with its own considerations regarding liquidity, minimum investment requirements and applicable investor protections. Gaining an understanding of these options is a crucial step in determining whether and how private market investments can be effectively integrated into an individual’s broader portfolio strategy.
Common investment vehicles for accessing private markets
1. Self-Directed IRAs (SDIRAs)
A self-directed IRA is a retirement account that allows individuals to invest in a much wider range of assets than a traditional IRA or 401(k). Beyond public stocks and mutual funds, investors can use SDIRAs to hold private equity, real estate, venture capital, crypto and more.
Because retirement accounts are generally structured for longer time horizons, their design may help accommodate the limited illiquidity of private markets. Investors benefit from the tax-advantaged growth of an IRA while allocating to alternative assets that may outperform public markets over the long term. The performance of private market investments varies, and there is no assurance they will outperform public markets.
2. Feeder funds and fund platforms
Traditionally, investing in top-tier private equity or venture capital funds required high cash commitments. Feeder funds and modern fund platforms help address this barrier by pooling capital from many individuals into a single investment vehicle.
The pooled approach provides investors with exposure to institutional-grade funds at far lower minimums. While investors still rely on the fund manager’s discretion, feeder funds can be an efficient on-ramp for those seeking diversification across professionally managed portfolios of private assets.
3. Interval funds and tender offer funds
For investors who want exposure to private markets with some liquidity options, interval funds and tender offer funds are increasingly popular. These are SEC-registered vehicles that invest in illiquid assets like private credit, real estate or infrastructure but provide periodic liquidity windows, often quarterly or semiannually.
They are widely used by registered investment advisors (RIAs) and wealth management platforms because they combine institutional exposure with more flexibility than a traditional private equity fund. The trade-off: Liquidity is limited and not guaranteed, but it can be attractive compared to longer lock-ups.
4. Special purpose vehicles (SPVs)
A special purpose vehicle is a single-purpose legal entity formed to pool investors into a specific deal, often in venture capital. For example, a startup raising a $5 million round may allow smaller investors to participate through an SPV managed by a lead investor or platform.
SPVs offer targeted access to individual opportunities and can be relatively transparent about deal terms. However, they typically lack diversification, so investors should approach them as complements to, rather than substitutes for, diversified funds.
5. Crowdfunding platforms
The JOBS Act expanded equity crowdfunding, enabling platforms to raise capital for startups and private companies from a broader set of investors. Structures like Regulation A, Regulation CF and Regulation D allow participation with lower minimums than traditional venture capital.
Crowdfunding platforms have expanded access to certain private investment opportunities; however, the quality and structure of these offerings can vary significantly. Investor protections may be more limited than in institutional funds. While transparency has improved as platforms evolve, investors should carefully evaluate offerings, understand the associated risks, and consider how such investments may fit within a diversified portfolio.
6. Private REITs and BDCs
Private real estate investment trusts (REITs) and business development companies (BDCs) provide exposure to real estate and private credit, respectively. These vehicles are typically non-traded but offer a bit more liquidity than traditional private funds.
They are designed for income-oriented investors, with dividends generated from rent, interest or loan repayments. While not as flexible as public REITs or debt funds, private versions often pursue strategies less correlated with public markets.
The benefits of using a self-directed IRA
Self-directed IRAs offer a unique set of advantages for private market investing worth noting:
- Duration matching: Private equity, venture capital, and real estate can require years to realize returns. Since retirement accounts are already earmarked for decades-long growth, the lock-up periods are less burdensome.
- Tax advantages: Gains from private market investments inside an IRA grow tax-deferred (Traditional self-directed IRA) or tax-free (Roth self-directed IRA).
- Diversification beyond public markets: With public market volatility and uncertainty, self-directed IRAs provide investors with tools to rebalance portfolios with alternative assets that may enhance long-term portfolio durability.
- Direct access: Unlike fund-of-funds structures, self-directed IRAs empower investors to choose deals directly, offering greater control over how their retirement capital is deployed.
Comparing SPVs and crowdfunding platforms
Both SPVs and crowdfunding platforms open the door to specific private deals, but they differ in accessibility, transparency and investor protections:
- Accessibility: Crowdfunding platforms generally allow smaller minimums, sometimes just a few hundred dollars, while SPVs often require higher commitments.
- Transparency: SPVs are usually structured around a single deal with clear terms, while crowdfunding platforms may offer broader access but with varying levels of disclosure.
- Investor protections: SPVs often involve accredited investors under Regulation D, benefiting from more structured governance. Crowdfunding platforms, by design, accept non-accredited investors, but protections can be less robust.
Both vehicles serve important roles, but investors should carefully weigh the balance between ease of entry and safeguards.
Building a retirement portfolio with multiple vehicles
For individuals planning for retirement, it is important to balance liquidity, risk and potential return when considering private market access points. Each investment vehicle has distinct characteristics, benefits and limitations. Below are some general considerations:
- Consider a self-directed IRA for portfolio diversification: For investors seeking portfolio diversification, a self-directed IRA can allow for long-term allocations into private equity, venture capital or real estate. The tax advantages and horizon alignment can make this a natural fit.
- Consider interval funds or private REITs for more liquid options:Internal funds or private REITs,which provide income and limited redemption opportunities, can complement the illiquidity of many private market investments
- Consider more targeted exposure via SPVs or crowdfunding: Investors looking for even greater diversification could consider allocating a small percentage to an SPV, which can provide more robust risk management, or into a regulated crowdfunding platform, which typically offer broader access to venture capital.
- Diversification through feeder funds: For broader access to institutional managers, feeder funds offer diversified pools without requiring multimillion-dollar checks.
By layering these vehicles thoughtfully, investors can build a more diverse portfolio that combines long-term compounding with periodic liquidity and targeted opportunities.
The bottom line
Private markets are no longer off-limits to individuals. In fact,they are increasingly accessible through an evolving ecosystem of investment vehicles. From feeder funds to crowdfunding platforms, investors today can construct portfolios once reserved for institutions.
Yet not all vehicles are created equal. For those building wealth with a long-term view, self-directed IRAs emerge as powerful and efficient tools. They align with the illiquidity and compounding nature of private markets while delivering tax-advantaged growth.
As investors rethink traditional portfolio strategies, they should consider their goals, priorities and timelines when selecting one or multiple vehicles for investing in private markets.
