Private equity investments are largely unregulated by the Securities and Exchange Commission (SEC) since they are not traded in the public markets.
However, since the passage of the Dodd-Frank Act in 2010, large PE firms are required to provide some information about their businesses to the regulators. Nonetheless, investment opportunities for retail investors are very limited.
Private equity is part of a larger asset class called alternative investments, and investment in alternatives has typically been limited to institutions and persons deemed accredited investors by the SEC.
There are several ways to qualify as an accredited investor. Have an annual income of $200,000—$300,000 for a couple—for the past two years, maintain a net worth of $1 million dollars or more, or demonstrate “defined measures of professional knowledge, experience, or certifications” acceptable to the SEC.
Private equity firms are looking for new sources of investment as the industry matures. A recent study by Bain and Company reported that individual investors hold roughly 50% of the estimated $275 trillion to $295 trillion of assets under management globally. However, those investors are responsible for only 16% of assets under management held by alternative investment funds.