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PENSCO Blog

Fresh alternative asset insights and the latest news on real estate and private equity investing.

Retirement Investors Seek More Alternative Assets for their IRAs

  |  By Curtis Glovier

Investors are increasing the amount and/or percentage of alternative assets they own in their self-directed IRAs to diversify their portfolios and invest in opportunities where they already have personal knowledge or expertise.

These are the major finding of PENSCO’s annual survey, where we ask clients about the use of alternative investments within their self-directed IRAs. Self-directed IRAs allow investors to expand their asset allocation beyond traditional exchange-traded assets like stocks and bonds to invest in alternative assets such as real estate, private equity, notes and peer-to-peer (P2P) lending.

This is also the first survey we have conducted since I joined PENSCO as Chairman and CEO in August, and it offers a glimpse into how clients are thinking about asset allocation and positioning retirement portfolios headed into 2017.

The following are the reasons PENSCO clients cited as the most important benefits of investing a portion of their IRA dollars in non-traded alternative assets:  

When it comes to the types of alternative assets attracting retirement investor interest, a considerable number of survey respondents indicated they are likely to increase their holdings of real estate, private equity and notes. More than half of the survey participants said they are likely to increase their retirement portfolio allocation to real estate, while 26% said they are likely to increase their allocation to private equity and 22% said they are likely to increase their investment in notes.

However, half of our survey respondents said they don’t know how to find a private placement opportunity that meets their risk tolerance and investment goals, and they are unclear on how to invest in private equity through a crowdfunding platform. Only 40% of investors indicated they seek advice from financial advisors on alternative asset investments for retirement accounts.

This presents a sizable opportunity for financial advisors to help retirement investors who want the diversification of alternative investments, but don’t know where to find the opportunities.

PENSCO is also working to ensure that individual investors can quickly and easily learn more about alternative asset opportunities. We have launched The PENSCO Marketplace® — a network of providers, products and services for alternative asset investors. Within it is PENSCO’s Professional Directory which lists professionals, such as attorneys and CPAs, who specialize in self-directed IRAs and may be able to assist you with investing in alternatives.

In 2017, we expect demand for alternative assets to increase as more investors gain access to these investment opportunities and investors diversify their retirement savings portfolios to weather market volatility. In future posts on the PENSCO blog, I’ll be writing about the expanded use of alternative assets in self-directed IRAs and how investors are using alternative assets to grow their retirement portfolios.

These findings are based on a study of 684 clients who custody retirement assets in self-directed Individual Retirement Accounts (IRAs) with PENSCO.

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. PENSCO is indirectly affiliated with a registered broker dealer and with a licensed small business investment company through Opus Bank (“Opus Affiliates”). Other than the Opus Affiliates, PENSCO is not affiliated with any financial professional, investment, investment sponsor, or investment, tax or legal advisor.