IRA Investors Signal Interest in Alternatives

PENSCO Trust Company is an IRA custodian specializing in custody of private equity, real estate, notes and other non-exchange-traded assets. The firm published a survey showing a strong majority (71%) of existing PENSCO clients say they would invest more of their IRA funds in alternative, non-traded assets if they had a better understanding of the assets available. About the same number (70%) say they would use more alternative investments in their IRA if granted better access to the asset class.

Additional findings show three in 10 investors (30%) see alternatives mainly as an important portfolio diversification opportunity for their IRA, while 28% think alternatives present an opportunity to invest in businesses and sectors where they have personal expertise to support investing decisions. Top hurdles, according to PENSCO, include lack of reliable information and lack of awareness about alternatives and non-traded assets.

Clients also cited significant interest in knowing more about the rules governing IRA investment, PENSCO says. As the firm observes, self-directed IRAs can give investors more control and flexibility when it comes to choosing investments compared with other retirement savings vehicles. Notably, the study finds half of the investors surveyed already consider alternatives to be a core holding in their portfolio and do not plan to change their allocations in the near term. An additional 26% plan to increase their investment allocations to alternatives and non-traded assets in the future, PENSCO says.

“Over the past five years, we have seen steadily growing interest from individual investors in using retirement dollars to invest in non-traded, alternative assets,” notes Kelly Rodriques, CEO of PENSCO. “While many are doing so to achieve diversification, we are also seeing individuals wanting to leverage the ability to grow their assets tax-deferred and to use less liquid retirement dollars to participate in longer term private placement opportunities, especially in light of the growth of the crowdfunding space.”

Among the hurdles with respect to identifying opportunities in the alternatives space, one in three investors are not familiar with any detailed, reliable information about non-traded alternatives, PENSCO says. The same number say they lack awareness of other opportunities that exist in the investment markets.

Despite this, clients show an interest in knowing more about the rules that govern IRA investments, as well as the potential benefits to investing directly versus indirectly in alternatives. When asked what tools or resources helped guide their existing alternative investments, IRA investors ranked conversations with professionals and with friends, family or colleagues as the most helpful.

The firm points to the PENSCO Marketplace, launched earlier this year, as a solution designed to meet the growing interest among individual investors to hold alternative assets in their self-directed retirement accounts. The tool helps individuals and retirement planning professionals locate and invest in private placements.

The PENSCO Marketplace now features several new crowdfunding sites that give accredited investors access to private placement opportunities in a variety of industries, the firm says. PENSCO has pre-reviewed many of the offerings found on the participating crowdfunding sites in an effort to expedite their ability to accept qualified retirement dollars.

“With the rise of crowdfunding platforms, the range of opportunities is multiplying, and, as our study results show, investors and their advisers need additional support and resources to find investment opportunities that are appropriate for their long-term goals,” Rodriques explains. “We created the PENSCO Marketplace to be a go-to resource to help individuals leverage alternative investment opportunities as part of their retirement planning.”

In addition to the crowdfunding sites, the PENSCO Marketplace also includes professional resources, such as access to attorneys, financial planners and tax professionals who specialize in real estate, private placements and various other alternative investments and may be needed to help an investor facilitate his/her alternative asset investment.

PENSCO Trust Company provides solutions and services to registered investment advisers (RIAs), financial planners, investment sponsors, crowdfunding platforms and professional service providers seeking an alternative asset custodian for their clients. More information is available at www.pensco.com.