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    Jan. 22, 2026

Specific Concerns About How Retailization Could Impact Institutional Investors’ Interests (Part Two of Three)

The retailization of the private funds industry is continuing unabated, picking up steam and, at this point, seemingly inevitable. As fund managers clamor for a share of this new capital, institutional investors are raising concerns about the limited understanding among all market participants about how this influx of retail capital – with its own unique traits and incentives – will impact their long-term interests. Certain potential changes are rooted in unique features of retail vehicles, as their periodic redemption offerings create liquidity risks and their evergreen nature produces constant fundraising pressure. Others are based on likely conflicts of interests from fund managers’ parallel management of retail funds and private funds, which could impact how investments are allocated and the ongoing availability of co‑investment opportunities. In an attempt to get ahead of those issues, the Institutional Limited Partners Association (ILPA) recently issued a white paper cataloguing some potential risks of retailization. This second article in a three-part series examines specific concerns about how retailization will affect everything from fund liquidity, governance rights and co‑investment allocations, with supporting insights from the ILPA white paper. The first article delved into the market and regulatory efforts driving retailization, and how that is stoking fears among institutional investors. The third article will explore how the impact of retailization on managers’ operations will affect institutional investors, as well as protective measures the latter can adopt. See “Inherent Obstacles and Promising Pathways to Retailization in the PE Industry” (May 29, 2025).

Rethinking the Relationship Between GCs and Outside Counsel

The role of GC at an investment manager has evolved far beyond that of a back-office risk mitigator or escalations desk. The modern GC is a strategic executive who is deeply integrated into the firm’s business strategy, serving as both a risk architect across operational and investment lifecycles and as a credibility anchor with regulators and investors. GCs’ responsibilities typically encompass establishing the firm’s legal objectives – including the identification, assessment and prioritization of risks – which necessitates reconciling speed with quality and balancing privilege with transparency. GCs are also tasked with selecting and managing external legal resources to achieve their overall objectives. The approach an investment manager takes in managing its relationship with external counsel significantly influences its ability to realize its legal and business goals. Treating outside counsel as a strategic partner – rather than merely another third-party vendor – positions the firm to measure the relationship’s success in terms of business outcomes and regulatory resilience. In a guest article, Lowenstein Sandler partner Courtney B. Posner outlines the strategic value that outside counsel can provide, details metrics GCs can use to evaluate legal counsel and offers practical tools GCs can wield to optimize their relationship with external counsel. See “GCs’ Increasingly Critical Role in Managing Risk and Ensuring Compliance” (May 1, 2025).

Dechert and Mergermarket 2026 PE Outlook: Fundraising Difficulties Stoke Demand for Assorted Liquidity Solutions

“The liquidity cycle is a key strand” running through the 2026 Global Private Equity Outlook (Report), observed Dechert partner Maria Tan Pederson during a webinar discussing the findings of the eighth annual PE industry study conducted by Dechert and Mergermarket. Fundraising continues to be hampered by the challenging environment for portfolio company exits, which has resulted in fewer distributions to investors – and, thus, less money for investors to reinvest. This article discusses the key findings in the Report, including the portions therein devoted to high-level industry and regional issues; co‑investments; fund finance and alternative liquidity solutions; and the growing role of private credit in PE financing solutions. The results in the Report are supplemented by associated insights from the Dechert webinar, which featured Dechert partners and PE sponsors. See “Dechert and Mergermarket 2025 PE Outlook: Ongoing Fundraising and Liquidity Challenges” (Feb. 6, 2025).

Preparing for SFDR 2.0: European Commission Proposes to Overhaul the E.U.’s ESG Regime

The E.U. Sustainable Finance Disclosure Regulations (SFDR) set forth a disclosure framework for funds based on whether and how they seek to engage in sustainable investing or consider environmental, social and governance factors in the investment process. Since the SFDR took effect in 2021, the number of funds launched that satisfy its requirements has continued to grow each year. On November 20, 2025, the European Commission issued a proposal to substantially revise the SFDR (Proposal). If adopted, the Proposal would eliminate certain entity-level requirements; replace the current Article 9 approach, which is tied to the definition of “sustainable investment,” with exclusion-based criteria; add a new category for funds with transition-related objectives; and make other product-level changes. A recent Linklaters program examined the key elements of the Proposal, which the speakers referred to as “SFDR 2.0,” and how it would change the existing SFDR regime. The program featured Linklaters partner Raza Naeem, managing associate Clare Wiles and counsel Julia Vergauwen. This article parses their insights and the relevant provisions of the Proposal, including key differences between the Proposal and an earlier, leaked version. See “SFDR Impact Analysis Finds Sustained Growth in E.U. Sustainability‑Focused Funds, Despite U.S. Headwinds” (Jun. 12, 2025).

Governance and Succession Planning for Fund Managers

Many investment fund managers are run as “benevolent dictatorships,” while others are more democratic, according to a Practising Law Institute (PLI) program on governance and succession planning for fund managers’ upper-tier entities. In either case, having a clear, documented governance structure and plans for both anticipated and unanticipated departures of founders and other key personnel are essential to ensuring smooth operations and an eventual transition to a new generation of leaders. They are also important considerations for institutional investors. The program covered governance and decision-making; founders’ retirement; business divorces; withdrawal of key personnel; succession planning; and sales of stakes in the fund manager’s GP. Norton Rose Fullbright partner Joshua Cohen moderated the discussion, which also included Proskauer partner Jennifer M. Dunn, Sidley Austin partner Elizabeth Shea Fries and Fried Frank partner Colin S. Kelly. This article synthesizes their remarks. For coverage of other PLI programs, see “Division of Investment Management Staff Discuss Staffing, Operations, Rulemaking and Other Developments” (Oct. 16, 2025); and “To Work Effectively, CCOs Need Authority, Autonomy and Information” (Dec. 12, 2024).

Fried Frank Adds Partners in New York and D.C.

Fried Frank has welcomed two partners – John J. Oberdorf III has joined the firm’s fund finance practice in New York, and Saif I. Shah Mohammed has joined the firm’s asset management M&A practice in Washington, D.C. For insights from Fried Frank, see “Institutional LPs’ Growing Concerns Over Retailization of the Private Funds Industry (Part One of Three)” (Jan. 8, 2026); and “Key Considerations in Secondaries Fund Financing Transactions” (Jan. 8, 2026).

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