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Hal S. Scott & John Gulliver, Comm. on Cap. Mkts. Reg., Expanding Opportunities for Investors and Retirees: Private Equity (2018).

Abstract: In recent years, U.S. companies have raised more equity through private offerings available only to institutional and high-net-worth investors than through initial public offerings (“IPOs”) that are available to the general public. The number of U.S. public companies has also been steadily declining, and private start-up companies are frequently reaching billion-dollar valuations without opening up to the public for investment. In this report, Expanding Opportunities for U.S. Investors and Retirees: Private Equity, we examine whether U.S. policymakers should expand access to investments in private companies through private equity funds. A private equity fund refers to an investment vehicle that invests in the securities of private companies and that is not registered with the Securities and Exchange Commission (“SEC”) as an investment company. Private equity funds include buyout funds that acquire controlling stakes in businesses and venture capital funds that invest in young private companies with high growth opportunities. We find that private equity funds have a well-established performance history that justifies expanding investor access to them. We recommend three ways to do so. First, legislative reforms to expand access to direct investments in private equity funds. Second, SEC reforms to expand access to public closed-end funds that invest in private equity funds. And finally, Department of Labor (“DOL”) reforms to facilitate the ability of 401(k) plans to invest in private equity funds.