Europe's drive to channel ordinary savers into private asset funds is drawing growing mis-selling warnings, even as platforms like Berlin-based Trade Republic race to offer retail investors access to products once reserved for institutions and the ultra-wealthy. The Financial Times first reported the breadth of industry concern, pointing to a widening gap between how these products are marketed and what investors may actually face when they want their money back.
The warning signs are already visible in the US. In February, private credit group Blue Owl permanently restricted investors from withdrawing money from one of its early retail funds. Blackstone's $82 billion flagship private credit fund, Bcred, saw $1.7 billion of net outflows in the first quarter, and the firm's market capitalization dropped from roughly $250 billion at the end of 2024 to about $134 billion.
"So many players are getting involved in the distribution of these products for the first time," said Steffen Pauls, co-chief executive of Moonfare. "There is a risk of mis-selling."
Regulators Open the Door
The EU's revised European Long-term Investment Fund, Eltif 2.0, launched in 2024 and explicitly targets individual investors. There are now 246 registered Eltifs available across Europe, with assets estimated at around €33.3 billion. In the UK, the equivalent Long-term Asset Funds hold roughly €6 billion. From next month, British investors will also be able to hold private asset funds inside an ISA, and Hargreaves Lansdown has said it will offer them.
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ESMA warned on Wednesday - the same day this story published - that EU financial markets are entering 2026 in a high-risk environment, with structural vulnerabilities in semi-liquid products a growing supervisory concern.
"Before we widen access to private markets, we need honest answers to hard questions," said Robin Powell, a financial transparency campaigner. "Can retail investors genuinely understand what illiquidity means for them personally? And who is accountable when it goes wrong?"
Liquidity Risk Is the Core Problem
Private asset funds invest in things that are hard to sell quickly. Redemptions are typically allowed only during set windows, capped at maximum amounts. Germany's Greenman Open fund, a €1.3 billion Eltif, suspended withdrawals at the end of last year for exactly that reason.
The 2019 collapse of Neil Woodford's equity income fund remains the starkest warning. Woodford had built substantial positions in unquoted companies; when investors rushed to exit, the fund was suspended and later wound down, leaving thousands with losses. "An open-ended fund with illiquid underlying assets is a loaded gun," Powell said. "It works fine until it doesn't."
A recent Morningstar report also challenged a central marketing claim, finding that semi-liquid strategies "often carry traditional equity or credit risks and are not suitable to play the role of portfolio diversifiers."
Trade Republic and the Democratization Pitch
Among the loudest advocates is Trade Republic, the Berlin fintech that reached a €12.5 billion valuation in December. The company partnered with Apollo and EQT to offer fractional private market access from €1, has expanded into Poland and has been reshaping retail investing habits in Italy.
Co-founder Christian Hecker notes that its average customer is 30 years old, with "30-40 years of savings life in front of them." He adds: "As a broker, we have an obligation to be very transparent that this is not the public markets."
A parallel fight is playing out over whether blockchain tokenization could open a faster - or riskier - route to private market access. Robinhood CEO Vlad Tenev has argued that tokenization is "the biggest innovation in capital markets in well over a decade," with plans to give retail users access to private equity and real estate.
But Kraken co-CEO Arjun Sethi called the tokenization of private company stocks "a terrible idea," pointing to transfer restrictions and thin buyer pools that could leave token holders with no market to sell into. Robinhood's earlier attempt to sell tokenized OpenAI shares in Europe ended awkwardly when OpenAI publicly stated the tokens did not represent actual company equity.
Who Carries the Risk
BNP Paribas Wealth Management's Claire Roborel de Climens said she avoids the term "semi-liquid" with clients entirely. "They are not fully liquid," she said. Pauls at Moonfare said clear disclosure "should be non-negotiable," and that a manager's right to halt withdrawals "needs to be properly explained."
With industry estimates suggesting €100 billion could flow into Eltif 2.0 vehicles by 2028, who bears the cost when things go wrong, and how clearly that is disclosed upfront, remains unresolved.
