Access Without Fairness: An Ethical Critique of Private Equity Democratization

Date of Award

Spring 5-2026

Degree Name

Bachelor of Science (BS)

Advisor(s)

Miguel Alzola

Abstract

Today, the idea of democratizing private equity has been proposed as a way to financially include retail investors. This paper focuses on retail access to private equity through intermediated retirement vehicles such as 401(k) plans, target-date funds, and similar defined contribution products. The movement seeks to expand access to investment opportunities that have been historically limited to institutional and high-net-worth investors. This paper challenges the characterization of equality by examining whether expanded access to private equity satisfies ethical conditions and what is required for a fair market. Drawing on John Boatright's framework of ethical exchange, as well as other philosophical perspectives on justice in financial markets, the analysis will evaluate private equity along the themes of knowledge, fairness, suitability, and the tension of freedom and paternalism. This paper argues that structural features of private equity - opacity in valuation, absence of standardized risk metrics, persistent performance dispersion, and relationship-based access - undermine the conditions necessary for rational consent and fairness. Retail investors, who are able to gain access through intermediated vehicles, face significant informational disadvantages and are offered inferior positions compared to more powerful institutional partners. These asymmetries are not by chance but are due to the structural design of the private equity market. The paper concludes that under current market conditions, expanding private equity access to ordinary retail investors is ethically unjustified since it cannot fulfill conditions necessary for informed consent, fair opportunity, and adequate fiduciary protection through intermediated retirement vehicles.

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