February 4, 2026
Growth, Regulation, and the Next Phase for Small Alternative Asset Managers
Alternative asset managers experienced another year of meaningful growth in 2025, reinforcing the sector's transition from a niche allocation to a core component of global investment portfolios. By mid-2025, global private markets assets under management had reached approximately $22 trillion, growing roughly 6% year over year, with an increasing share of that growth driven by evergreen funds, interval structures, SMAs, and co-investment vehicles rather than traditional closed-end funds.[1]
At the same time, the regulatory backdrop for alternatives became more constructive, with several developments in 2025 and early 2026 reducing areas of uncertainty and clarifying how managers can approach capital formation and investor access. These include:
• Rule 506(c) is becoming more common in practice.
As asset managers rely more heavily on websites, content, and ongoing investor communications, maintaining a traditional Rule 506(b) posture has become increasingly impractical. Recent staff guidance, including a March 2025 no-action letter issued by the Division of Corporation Finance of the SEC to Latham & Watkins, provided incremental comfort around accredited investor verification requirements under Rule 506(c). The more significant development is that managers are recognizing Rule 506(c) as a better structural fit for modern capital raising practices.
• The SEC's Spring 2025 regulatory agenda identified specific exempt-offering reforms tied to capital formation. The agenda included a rulemaking item to update exempt offering pathways, encompassing potential changes to how issuers interact with investors and raising capital.
• The SEC proposed updated "small entity" definitions. On January 7, 2026, the SEC proposed amendments to raise the asset-based thresholds for which investment advisers and investment companies are considered "small entities" under the Regulatory Flexibility Act — including increasing the RAUM threshold for advisers from $25 million to $1 billion and the net asset threshold for investment companies from $50 million to $10 billion, with future inflation adjustments.
• AML obligations for investment advisers were delayed — but not abandoned. FinCEN postponed the effective date of its rule extending AML/CFT requirements to registered investment advisers and exempt reporting advisers from January 1, 2026 to January 1, 2028, and indicated its intent to revisit the scope of the rule.
• The Department of Labor reset the conversation around alternatives in retirement plans. In August 2025, President Trump issued an Executive Order directing the DOL to facilitate broader access to alternative assets in 401(k) and other defined-contribution plans. The DOL subsequently rescinded prior guidance that had discouraged adoption and restored a more neutral, process-focused framework.
• SEC examinations and Marketing Rule activity increased focus on communications by SEC-registered investment advisers. Throughout 2025, staff observations and risk alerts from the SEC's Division of Examinations signaled closer scrutiny of registered advisers' marketing practices, including websites, performance presentations, testimonials, endorsements, and the use of third-party ratings.
The Retail Opportunity
A significant portion of recent growth in alternatives is tied to retail and mass-affluent investors. Projections from Deloitte suggest that retail investors' allocations to private capital may grow exponentially from the end of 2024 through 2030 — from an estimated $80 billion to $2.4 trillion in the United States, and more than triple in the European Union from approximately €924 billion to €3.3 trillion.[2]
This trend presents a meaningful opportunity for smaller asset managers that rely on retail-adjacent capital for fundraising, provided they are structured to meet the associated regulatory and operational demands.