Martin Pelletier observes a familiar pattern unfolding over the past few years, with retail investors steadily moving into a segment of the market that appears to be in the early stages of a correction. He draws on lessons from his time as a research analyst, noting that underwater bought deal equity offerings were once handed off from capital markets desks to investment advisers, repackaged, and marketed to clients as so-called 'hot deals.' The intent is to signal exclusivity and sophistication by offering access to strategies that were once the domain of pensions and endowments.
The Illusion of Exclusivity
While such access can appear attractive to retail investors, and in some cases genuinely useful, it rarely comes without cost. Pelletier emphasizes applying basic common sense: why would an opportunity be sliced into thousands of small allocations for individuals rather than placed in a single transaction with a large institution that has scale, resources, and bargaining power? Institutional buyers typically negotiate better terms, lower fees, and stronger protections.
Private Equity and Credit in a Changing Environment
For much of the past decade, private equity and private credit were built in a world of falling rates, abundant liquidity, and a persistent search for yield. This encouraged investors to move further out on the risk spectrum for incremental return. As rates compressed and traditional fixed income offered little income, private credit emerged as an attractive alternative, while private equity benefited from cheap financing and rising multiples. Now that rates have moved off their lows and the cost of capital has reset higher, these strategies are being brought to a broader audience at a point in the cycle where past assumptions are being tested.
The Hidden Risks of Private Investments
Part of the appeal of private investments lies in what is not seen. Without continuous market pricing, volatility appears muted and the return profile looks smoother, creating an impression of stability and control. In truth, this is often just the absence of price discovery, where transactions that would reveal changing valuations are not occurring or observable, rather than the absence of risk. Pelletier compares this to pricing a home every day: you would experience the same swings as public markets, but because that does not happen, you rely on occasional appraisals and only discover true value when you sell. The underlying economics of the asset do not change simply because they are not constantly observed.
