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Retirement Funds to Invest in Private Equity Opportunities

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  |  By Christopher Orr, SDIP

A mismatch often exists between investment sponsors, such as entrepreneurs and fund managers who need to raise money for their next offering, and investors who have the liquidity available to invest in private equity. But some of this mismatch can be solved by tapping into an overlooked source of capital: retirement funds.

Personal retirement funds, such as traditional and Roth IRAs, are often overlooked when it comes to private equity investing because most investors mistakenly believe IRA funds can only hold traditional exchange-traded assets, like stocks, bonds and mutual funds.

But by using an IRA that they self-direct, investors can use their tax-advantaged dollars to invest in private equity. Self-directed IRAs allow account owners to choose how and where to invest their retirement savings. Self-directed IRAs, which represent an estimated $146 billion of retirement assets,[1] can own various types of private equity, including LLCs, private common stock, private hedge funds and convertible notes.

As a fundraiser or investment sponsor, understanding how self-directed IRAs can be used to fund private equity offerings can help you to:

Although using IRA funds to invest in alternative assets may seem complicated, PENSCO can help you understand the process of funding private equity offerings with retirement funds. For instance, our Deal Office can perform a pre-review to determine if your investment is “administratively feasible” and can be held in a PENSCO retirement account.[2]

We also have introduced our Alt-Nav™ online deal funding technology that digitizes what has traditionally been a paper-intensive investment process. Alt-Nav has helped to substantially reduce the amount of paperwork involved by creating online wizards, alerts and other digital tools that can keep you and your investors informed — and cut the private equity investment process down from weeks to days.

Self-directed IRA accounts can represent a compelling investment opportunity for investors interested in private equity. To learn more, download our guide on investing in private equity with self-directed IRAs.

[1] The SEC estimates 2% of all IRAs are self-directed.
[2] PENSCO does not review for investor due-diligence or to determine compliance with state of federal laws. It is purely to determine whether or not PENSCO can administer the asset within a PENSCO account. No representations to the contrary should be made by issuer or their selling agents.

This Blog does not provide investment, tax, or legal advice nor does it evaluate, recommend or endorse any advisory firm or investment vehicle. Investments are not FDIC insured and are subject to risk, including the loss of principal.

PENSCO Trust Company performs the duties of an independent custodian of assets for self-directed individual and business retirement accounts and does not provide investment advice, sell investments or offer any tax or legal advice. Clients or potential clients are advised to perform their own due diligence in choosing any investment opportunity as well as selecting any professional to assist them with an investment opportunity. Alternative investments are not FDIC insured and are subject to risk, including loss of principal. Other than the Opus Affiliates, PENSCO is not affiliated with any financial professional, investment, investment sponsor, or investment, tax or legal advisor.