Private Equity for Everyone? Measuring Retail Investor Literacy and Behavioral Patterns

Sammanfattning

As private equity (PE) becomes increasingly accessible to retail investors through retirement plans and semi-liquid investment vehicles, the question of whether retail investors understand the asset class has become more pressing. This thesis examines retail investor understanding of private equity by comparing general financial literacy with PE-specific literacy, and by analyzing how overconfidence and narrative framing shape willingness to invest in PE. Using survey data from 1,032 U.S. retail investors, we find that respondents perform substantially worse on PE-specific questions than on standard financial-literacy measures, suggesting that knowledge of traditional financial concepts does not readily translate into understanding of private markets. PE literacy is concentrated primarily among respondents with the highest levels of general financial literacy, while overconfidence independently predicts willingness to invest in PE. Positive framing also increases stated investment intent, particularly among respondents with moderate levels of PE literacy. Overall, the findings suggest that retail access to private equity is expanding faster than retail investors' ability to evaluate the structures and risks embedded in the asset class, with important implications for investor protection and financial education.