IRA investors, it would seem, are looking for alternatives.
That's the point of a new survey from self-directed IRA custodian PENSCO Trust Co., which found that, among its clients at least, the majority would be interested in investing more in alternatives if conditions were right.
PENSCO, which helps advisors and their clients diversify retirement portfolios into alternative, non-traded assets, found that clients who responded to the survey said they would put more of their money into alternative, non-traded assets if they knew more about those assets (71 percent), and if they had more access to non-traded alternatives (70 percent).
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Alternative investments are often considerably riskier than the average mutual fund or ETF, and investment costs can also be several notches higher. Then there's the fact that many such "opportunities" are restricted to qualified (read: sophisticated, with money to lose if the asset goes bust) investors. So it's probably a good thing that IRA holders would want to know more about the projects into which they'd put their money.
Still, the fact that such a high number of investors wants access to those kinds of investments is also perhaps indicative of the quest for returns, since the mainstays of retirement portfolios — such as bonds — haven't provided all that much in the way of returns or income.
That's sent hardier investors flocking to the likes of hedge funds, commodities, real estate and private equity — all possibilities that could bring higher returns but could also result in higher losses.
But that's not necessarily a turnoff to the survey respondents, 30 percent of whom said that the most important benefit of alternative investments in an IRA was portfolio diversification. And 28 percent said it was the opportunity to invest in businesses in which they have expertise that drew them to alternatives.
Half of the respondents already have alternatives in their portfolios, and don't plan to change the allocation; an additional 26 percent are looking to boost the allocation of alternatives 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," Kelly Rodriques, CEO of PENSCO, said in a statement.
"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."
Crowdfunding, of course, helps fund startups that might otherwise have trouble landing traditional financing, an often risky proposition that, every once in a while, can yield nice-sized rewards.
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