If you scroll Crypto Twitter on any given day, you'll see the same slogan wrapped in different memes: "We're finally democratizing access to private markets!"
Sometimes it's a tokenized fund on-chain. Sometimes it's a semi-liquid vehicle in TradFi. Sometimes it's companies like Robinhood promising you exposure to private AI companies before IPO. On the surface, it all sounds like the same story: the gates are coming down, everyone can finally get in.
But once you strip away the slogans and look at how these "retail private funds" actually work, two uncomfortable patterns appear:
- Firstly, they are structurally two-tiered: the best versions of these products are sold to wealthier, more sophisticated investors. A different, weaker set of funds is quietly pushed onto everyone else.
- Secondly, they mask volatility instead of removing it: the risk doesn't disappear. It just stops showing up in the chart and starts showing up in gated withdrawals, delayed marks, and disappointingly low returns when it matters most.
This is the conclusion of Ben Bates' recent paper Retail Access to Private Markets. He looks at one slice of the landscape populated by business development companies (BDCs), and uses hard data to show how this new wave of "democratized" products actually behaves.
The Two Hidden Price Tags of Democratized Access
BDCs are vehicles that lend to or invest in smaller private companies; some are publicly listed, others are non-traded and sold through brokers to individuals. Those non-traded BDCs are marketed as a way for regular investors to get private market exposure with "less volatility" and regular income.
Bates finds that the version of these funds sold to less wealthy investors consistently delivers lower returns than similar vehicles reserved for richer clients. Non-traded BDCs pushed through retail channels underperform private BDCs that are only offered to wealthier individuals, even though they are supposedly playing in the same asset class.
In plain language: if you're not already rich, the odds are higher that the "private market access" you are being offered is a slower, fee-heavier, lower-quality product.
At the same time, the way these vehicles present risk is deeply misleading. Many retail-facing funds don't mark their assets to market every day the way a listed stock does. They revalue periodically, often quarterly, and rely heavily on internal models. A stark contrast to what greater transparency and price discovery could look like if similar exposure were built on Web3 rails.
The Dangerous Illusion of Smooth Returns
For a retail investor, the end result is a dangerous illusion. You see a gentle upward line and regular distributions and assume "low risk income." The real risk shows up somewhere else:
- It's in the fine print that says the fund can limit withdrawals to 5% of assets per quarter
- In the email that tells you your redemption request has been partially deferred
- In the years of opportunity cost you absorb while wealthier investors compound in higher-quality vehicles you never see
Similarly, in the same "democratized access to private markets" asset class, we have the Robinhood Ventures Fund I (RVI). A publicly traded closed-end fund that aims to invest in private companies and list its shares on the NYSE.
Here, for once, the democratization story is not entirely hollow: if you can open a US brokerage account and buy NYSE-listed securities, you will be able to buy RVI and get some exposure to private companies that used to be limited to accredited investors.
However, structurally, RVI is still a single, manager-controlled vehicle: you own shares in Robinhood's curated basket, on Robinhood's terms, at prices the market assigns to that wrapper, not direct stakes in the underlying deals on terms you can see on-chain.
All these attempts to give retail access to private markets are nothing more than half-hearted attempts at democratization.
What "Retail Private Funds" Really Are
Before we get into the politics and incentives, we need to name the machinery. When Bates talks about "retail private funds," he's talking about a specific family of vehicles that have exploded over the last decade:
- Registered closed-end funds
- Business development companies (BDCs)
- Non-traded Real Estate Investment Trusts (REITs)
- Interval and tender-offer funds
All of them share key traits: They hold illiquid private assets—think loans to mid-market companies, private real estate, private credit, sometimes venture or PE stakes. They don't provide daily in-out liquidity like an ETF or a secondary market. Instead, they offer periodic redemption windows, usually quarterly, and often capped at something like 5% of net asset value (NAV).
The industry marketing pitch is simple: "Institutional-grade access. Lower minimums. Less volatility. More diversification. All in a neat, semi-liquid wrapper."
If you're a crypto native, you can think of these funds as TradFi's attempt to build a "CeFi yield aggregator" on top of private markets:
- Underlying assets: risky, opaque, hard to value
- Wrapper: a smooth-looking NAV, some yield, quarterly exit windows
- Target user: you
Bates' X-Ray: Two Quiet Risks Nobody Tells You About
Question #1: Volatility That Disappears on Paper, Not in Reality
From 2015 to 2024, Bates shows that BDCs reported returns that looked suspiciously smooth—similar or higher average returns compared to a portfolio of high-yield bonds, but with dramatically lower volatility, despite the fact they were lending to smaller, riskier firms and using leverage.
In Web3 terms, imagine a DeFi lending pool that:
- Lends to thinly traded, highly levered mid-caps
- Uses leverage on top
- Shows you a perfectly smooth APY curve with no drawdowns
- And then tells you "look how stable this is"
You wouldn't believe it.
Yet in traditional private markets, that kind of smoothing is normal. These funds mark assets to the fund manager's model, not to noisy market prices. The problem is that retail private funds keep the smoothing but bolt on periodic liquidity.
When a downturn hits, two ugly options appear:
- Sell illiquid loans and assets at fire-sale prices to meet redemptions
- Slam the gates, cap redemptions, and tell investors they'll have to wait
We've already seen this movie: Blackstone's $60B+ non-traded REIT, BREIT, repeatedly hit its 5% NAV redemption limits in 2022–23 and had to restrict withdrawals after billions in redemption requests.
Question #2: Better Funds for the Rich, Worse Funds for Everyone Else
The second finding is even more uncomfortable. Bates splits his BDC universe into two families:
- Private BDCs – only available to wealthier, accredited investors
- Non-traded BDCs – broadly sold to less wealthy individuals through brokers and platforms
He finds that private BDCs report meaningfully higher returns—roughly 68 basis points more per quarter, or around 2.7 percentage points per year—than their non-traded cousins pitched harder at retail.
The alternative explanation is uglier: worse products are being channeled to less wealthy, less sophisticated investors simply because they are less able to discriminate between "high-fee, mediocre strategy" and "high-fee, genuinely skilled manager."
If you've watched how shitcoins are marketed versus how high-conviction investors actually allocate in crypto, this will feel familiar. The public narrative is "everyone can play." The actual flow is:
- Best deals and structures go to insiders or high-signal circles
- Lower-quality wrappers and higher-fee products go to everyone else
What Bates provides is not a vibe, nor an insinuation. It's hard evidence that this two-tier structure is already embedded in one of the flagship "democratization" vehicles for private credit.
Policy Momentum and the New Gatekeepers
The SEC's Balancing Act
In September 2025, the SEC's Investor Advisory Committee (IAC) released a detailed set of recommendations on how to handle retail access to private market assets:
- Favor registered funds (mutual funds, interval funds, ETFs) as the primary channel for retail exposure
- Shift the focus from pure wealth tests to investor sophistication when defining "accredited"
- Consider prudential limits on how much of a portfolio can be allocated to illiquid private assets
- Demand more transparency around valuation methods, fees, and liquidity risk
In other words: "We see the political and economic pressure to open this up. If we do it, we want it mediated through regulated wrappers with some attempt at honesty about risk."
Robinhood's Counter-Position
Robinhood has been lobbying in the opposite direction, calling the current accredited investor standard "antiquated" and arguing that AI and modern information access should make it possible for more people to participate directly in private offerings.
Their policy paper points out, correctly, that:
- There are fewer public companies today than in the 1990s
- A huge share of value creation occurs before IPO
- Only ~18.5% of US households qualify as accredited under current rules
The conclusion is straightforward: the current system locks most people out of where the compounding happens. On that, IPO Genie and Robinhood agree.
Trading Apps + Evergreen Wrappers = New Retail Gatekeepers
When you combine:
- Semi-liquid evergreen vehicles that smooth volatility and gate liquidity
- App-first brokers that excel at UX, notifications, and mass marketing
- Weak disclosure around real risk and product-tiering
You don't magically get "open access." You get a new layer of retail gatekeepers.
They show up as private banks and wealth platforms inviting their richer clients into "evergreen" funds structured as ELTIFs (European Long-Term Investment Funds). The same pattern is now wrapped in fintech clothing for less affluent retail investors. A trading app lists a convenient ticker that trades like any other stock, but the underlying vehicle is a portfolio of private loans or late-stage growth companies you never see in detail.
The interface looks like any ordinary account: a balance, a yield, a history chart. What you do not see is that exits can be capped, that redemption programs can be suspended when flows reverse, and that the calm performance line is the output of internal models applied a few times a year, not continuous price discovery.
This is the machinery Bates was X-raying when he wrote his study on retail private funds. Once you understand how it really works—the smoothing, the gating, the quiet product tiering—you are no longer falling for the slogans.
Reconstructing Better Rails: What a Crypto-Native Solution Must Do Differently
If you are a crypto native you already sense that porting these structures onto a blockchain and issuing a token would miss the point. Turning a non-traded BDC into an ERC-20 does not magically realign incentives. It just makes the same problems run on faster rails.
The goal has to be narrower and harder: design rails where access is genuinely wider, where risk is shown rather than disguised, and where the worst deals are not systematically routed toward the investors with the least ability to absorb losses.
That starts with accepting Bates' conclusions instead of trying to market around them. A portfolio of private loans or growth-stage startups with leverage baked in is volatile by nature. Hiding that reality behind a smooth NAV is not a "feature" for retail.
A crypto-native platform should lean in the opposite direction:
- Show how positions behaved in stress
- What drawdowns looked like
- How cash flows moved across a full cycle
- Make the rough edges visible
- Make the illiquid liquid
The same honesty is required on product tiering. In any opaque system, information asymmetry will create a two-class world by default. The only way to resist that gravity is to make performance, fees and deal quality radically transparent.
IPO Genie's Practical Commitments
For IPO Genie, the theory of better rails translates into practical commitments:
1. Radical Clarity About What Is Being Sold
If an allocation is early-stage, high-risk and likely to be illiquid for years, that should be obvious from the first description, not only from the risk disclosures at the back. There is no room for decks that imply bond-like stability from venture-style assets.
2. Honest Liquidity Design
Illiquid assets remain illiquid by nature; blockchain infrastructure can improve transparency, settlement, and secondary price discovery, but it cannot eliminate liquidity risk. What you can do is describe, in code and in plain language, how and when investors can exit, what happens when redemption demand exceeds supply, and what kind of discounts are likely in stressed conditions.
3. Avoiding a Hidden Two-Class Architecture
Economics and information should be aligned as far as possible: harmonized share classes instead of a maze of fine print, comparable performance reporting across ticket sizes, and governance checks against quietly spinning up "lite" products with worse terms aimed at less sophisticated users.
If a deal is only attractive enough to sell to someone who cannot read the term sheet, it does not belong on the platform.
4. Tying Rewards to Outcomes
The current semi-liquid fund complex lives on predictable management fees. A crypto-native platform can nudge in the opposite direction: make fee structures transparent, let token economics depend on realized returns and long-term investor outcomes.
Where This Leaves the Retail Crypto Investor
If you are a retail investor coming from crypto, the next decade will feel strangely familiar. You are going to be courted.
Semi-liquid funds will pitch you "private equity-like returns with smoother rides." Trading apps will offer tickers that look like ordinary stocks but quietly wrap baskets of private credit. Tokenization projects will claim they have finally made private markets "liquid" and "accessible."
Some of this will be real progress. There will be structures where the risks are explained cleanly, the economics are fair, and the liquidity constraints are honest trade-offs rather than traps.
Many other offers will be copies of institutional playbooks with a retail front-end: the same smoothing, the same gate-heavy liquidity promises, the same two-tier performance structure Bates has already documented in BDCs, now delivered through an app or a token instead of a private placement memo.
The reason IPO Genie exists is not to deny that this wave is coming, or to pretend we stand outside it. It is to compete inside that wave on different terms:
- On-chain transparency instead of opaque models
- Explicit liquidity constraints instead of implied promises
- Community-level curation instead of purely top-down product shelves
- Incentive structures that do not quietly route the most fragile risk to the people with the thinnest buffers
Conclusion: Deconstruct and Reconstruct
This is where the deconstruct–reconstruct logic becomes more than a nice slogan.
Deconstruction on its own just teaches you to see the traps. You end up cynical, assuming every attempt to open private markets to retail is a scam in slow motion.
Reconstruction on its own ignores the evidence. You end up believing that putting things on-chain somehow fixes incentive problems that are really social, legal and structural.
The work now—for regulators writing rules, for platforms designing rails, and for investors learning to ask sharper questions—is to hold both truths at once: the flaws are real, and better structures are possible.
That is what IPO Genie is building toward.
Ready to access private markets the right way? Join the IPO Genie presale and be part of a platform designed for transparency, not gatekeeping.
