Investors have long been drawn to the promise of "the technology of tomorrow," seeking to back innovations that could shape the future and generate outsized returns. The launch in 1948 of the Television Mutual Fund marked one of the earliest instances where retail investors could formally invest in a specific emerging technology, the then nascent television industry. This fund provided access to a basket of listed companies involved in television, reflecting the investment landscape of the time when growth investing was largely restricted to public equity markets due to the near absence of private capital channels accessible to retail investors.

At that period, the American Research and Development Corporation (ARDC), founded in 1946, stood out as a pioneering venture capital enterprise, albeit one focused on institutional investors such as endowments and family offices rather than everyday retail investors. ARDC notably sought to channel capital into unlisted start-ups, particularly ventures led by returning World War II soldiers, marking a significant development in the evolution of venture capital. One of ARDC’s landmark successes was its 1957 investment in Digital Equipment Corporation (DEC), which after the company’s 1966 IPO, yielded substantial returns, representing an early major venture capital triumph.

Fast forward nearly eight decades, and the global venture capital market has expanded dramatically to exceed $3 trillion in assets under management, according to data from financial research firm Morningstar. This boom underscores a transformative shift: many of today's fastest-growing and most innovative companies elect to remain private rather than go public. Such a trend has helped shape modern capital markets, but it also means that much of the potentially lucrative growth remains frustratingly out of reach for retail investors, who largely lack direct access to these private market opportunities.

However, this dynamic is beginning to change as the lines between public and private markets blur. Several key forces are driving this convergence. Firstly, there is a growing sense among investors that they are missing out on some of the best growth prospects, with about 90% of Europe’s fastest-growing companies being privately held, according to the Financial Times Europe’s long-term growth champions list. This points to a significant opportunity cost for retail investors unable to participate in these private ventures.

Secondly, the asset management industry is adjusting to this new reality by developing financial products designed to give investors exposure to private markets. Notably, European long-term investment funds (ELTIFs) have undergone regulatory revisions to become more investor-friendly by lifting minimum investment thresholds and broadening eligible asset categories. These changes suggest fund managers are eager to tap into a broader retail investor base by offering a wider range of higher-margin private market funds, though the products remain complex and relatively untested under stress conditions.

Thirdly, European policymakers are increasingly recognising private capital as a critical engine for enhancing productivity and innovation. Former European Central Bank President Mario Draghi highlighted in a recent report that narrowing Europe’s innovation gap with major economies like the US and China necessitates a significant increase in private investment. With constrained public budgets, mobilising savings from institutional and household investors forms a pivotal part of the EU's strategic growth agenda. While Europe retains leadership in mature innovation sectors such as pharmaceuticals and aviation, its venture capital funding remains disproportionately low. Morningstar’s PitchBook data reveals Europe accounted for only 13% of global venture capital deal values during the first three quarters of 2025, trailing behind both the US and Asia.

This shortfall in private risk capital is consequential. Without deeper pools of venture funding, Europe risks lagging in achieving its net-zero environmental goals, addressing immediate security needs, and capitalising on emerging technological waves. Despite the apparent collective benefits of expanding access to private equity markets for governments and fund managers, the picture is more nuanced, and cautionary, for retail investors.

Identifying and investing in the next high-growth private company remains challenging, even for seasoned investors, let alone retail participants. The unpredictable nature of emerging technologies is evident from examples such as the unexpected rapid integration of generative AI into daily life, while other anticipated breakthroughs, like widespread 3D-printed food, have yet to materialise at scale. The risks of misjudging investment trends, or entering too late or exiting too early, are substantial.

Moreover, direct investment in private equity demands considerable due diligence and portfolio diversification, requirements that most retail investors cannot meet on their own. Morningstar’s research advocates a patient, long-term investment approach consistent with the multi-year horizons typical of venture capital and private equity investments. Yet, the illiquid nature of these assets conflicts with the liquidity needs of many retail investors who may require timely access to their funds for life events such as purchasing homes or managing emergencies.

As a result, professional management remains the most prudent avenue for most retail investors seeking private market exposure, preferably through diversified funds managed by teams with established expertise. Nonetheless, while retail-focused vehicles like ELTIFs aim to facilitate smoother access, their structural complexity, costs, and unproven resilience under market duress pose concerns. There is also an emerging risk that the expansion of private markets could draw in fund managers lacking the necessary skills and experience to effectively steward private investments.

As private market access broadens, it is imperative that the interests and protections of retail investors remain central to regulatory and industry decisions. Ensuring these investors are equipped to navigate the complexities and risks will be crucial to fostering sustainable growth and innovation, while avoiding the pitfalls of misplaced capital in an evolving investment landscape.

📌 Reference Map:

  • [1] (Financial Times) - Paragraphs 1, 3, 4, 5, 6, 7, 8, 9, 10
  • [2] (Financial Times summary) - Paragraphs 1, 4, 5
  • [3] (Wikipedia on ARDC) - Paragraph 2
  • [4] (Harvard Business School Library) - Paragraph 2
  • [5] (Cambridge History) - Paragraph 2
  • [6] (Liquisearch on ARDC) - Paragraph 2
  • [7] (CGAA on ARDC) - Paragraph 2

Source: Noah Wire Services