A majority of PENSCO clients would invest more in non-traded, alternative assets if they had a better understanding of the alternatives available (71 per cent) and more accessibility to non-traded alternatives (70 per cent).
The finding is based on a study of 682 clients who have custody retirement assets in a self-directed Individual Retirement Account (IRA) with PENSCO. In a self-directed IRA, the IRA owner has more control and flexibility when it comes to choosing investments and can expand their asset allocation beyond stocks and bonds to include non-traded alternative assets.
The study also found that individuals consider the most important benefit of using their IRA to invest in non-traded alternatives is “portfolio diversification” (30 per cent), which is closely followed by ‘the opportunity to invest in business/sectors/industries about which I have personal knowledge or expertise” (28 per cent). Half of the investors already consider alternatives a core holding in their portfolio and don’t plan to change their allocation, and an additional 26 per cent plan to increase their investment allocation in the future.
“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,” says 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, one in three investors are not familiar with any detailed, reliable information about non-traded alternatives, and the same number say they lack awareness of other opportunities that exist.
Clients also cited an interest in knowing more about the rules that govern IRA investments, as well as the potential benefits to investing directly vs indirectly. When asked what tools/ resources helped guide their investments, they ranked conversations with professionals, and conversations with friends, family, or colleagues, as the most helpful.
Recognising the growing interest among individual investors to hold alternative assets in their self-directed retirement accounts, but realising the challenge in being able to locate and invest in private placements, PENSCO launched the PENSCO Marketplace earlier this year, a network of providers, products and services for alternative asset investors.
The PENSCO Marketplace features several new crowdfunding sites that give accredited investors access to private placement opportunities in a variety of industries. 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 advisors need additional support and resources to find investment opportunities that are appropriate for their long term goals,” says Rodriques. “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 specialise in real estate, private placements and various other alternative investments and may be needed to help an investor facilitate his/her alternative asset investment.
