Democratising investments is not just about access

One of the hotter stories in the financial press recently involves Blue Owl, a US specialist manager in private credit. One of its retail‑facing funds, Blue Owl Capital Corporation II, permanently restricted redemptions. Instead of allowing investors to redeem up to 5% of the fund each quarter, the manager will now liquidate assets gradually and return capital over time.

The decision followed redemption pressure after investors became concerned about loan valuations, many of which relate to software companies. The underlying assets are illiquid. When too many investors want their money back at once, the structure simply cannot cope.

For retail investors, the outcome is stark: capital that was assumed to be accessible is now effectively locked up.

Unfortunately, this is not an isolated incident. UK investors will remember the mini‑bond scandal, which harmed many yield‑seeking individuals. At the time, some products were marketed as “democratising asset‑backed, high‑income investments”. The language was reassuring. The reality was far less so.

In recent years, “democratising investments” has become one of the most overused phrases used by investment product providers. It sounds investor‑friendly. In practice, it is too often just a marketing slogan.

The word “democratisation” carries powerful connotations. It suggests something inherently good: opening up opportunities once reserved for large institutions—private equity, private credit, hedge funds, real assets—to a wider audience. As a former colleague once put it, the term creates a “halo effect” around the provider.

But what does democratisation actually mean?

A quick review of dictionary definitions shows that the term is most commonly associated with politics and governance. Only one definition—Britannica—frames it as “making something available to all people”. Crucially, however, it adds a second and often ignored dimension: “making it possible for all people to understand something”. This is where the industry’s use of the term begins to fall apart.

There has been genuine progress on access. Minimum investment sizes have fallen, distribution channels have expanded, and structures have been repackaged for the retail market. On that narrow definition, democratisation has been a success.

Understanding, however, has not kept pace.

Private equity and private credit behave very differently from traditional listed assets. Liquidity is limited. Valuations are infrequent and often model‑driven. Exit routes depend on market conditions that may not exist when investors want—or need—their money.

Institutional investors are better placed to live with these features. They have long investment horizons, predictable liabilities, and professional governance structures. Most individual investors do not. Liquidity needs can change quickly, driven by job losses, health issues, education costs, or family events.

Even investors who are comfortable remaining invested are affected by the actions of others. When redemption requests rise, managers may be forced to sell illiquid assets at material discounts, eroding returns for everyone.

None of this means that retail investors should be excluded from alternative investments. Many are perfectly capable of understanding complexity and risk. The problem lies in pretending that broader access alone amounts to democratisation.

If the term is to mean anything beyond marketing, it must also include education, transparency, and suitability. That means clearer communication of liquidity risks, more realistic expectations about valuations, and advice that places these investments within a proper financial planning framework.

True democratisation is not about selling institutional products to individuals. It is about ensuring investors genuinely understand what they are buying, why they are buying it, and when it may produce uncomfortable outcomes. Without that, “democratising investments” is little more than a comforting phrase—and one that risks doing more harm than good.

James Chu, CFA

Head of Investment Solutions