May 15, 2024

Alternative Assets and IRAs

Tags: IRA Alternative Assets

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Alternative Assets and IRAs

High Net Worth IRA Strategies: Alternative Assets 

The world’s wealthiest investors have long recognized that diversifying into alternative assets—that’s any investment that falls outside of traditional asset classes—may reduce overall portfolio volatility and enhance potential return. That’s because alternative assets, which can include non-publicly traded private assets such as private equity, often perform differently than traditional assets in a given market cycle.

Want an example? In 2022, a year when the S&P 500 declined by more than 20%, private equity was down just 4%; that same year, the Barclays Aggregate Bond Index lost 1% while the Cliffwater Direct Lending Index, an index comprised of private debt issuers, advanced by 6.30%.1 That’s one reason many investors may utilize alternatives in their portfolios. The data firm Preqin reports that alternative assets under management will grow from $13.7 trillion in 2021 to $23.3 trillion in 2027.2

Risks of Investing in Alternative Assets

Investing in alternative assets doesn’t come without risk. Among other things, their complexity and decreased liquidity require due diligence by the investor, which is why they’re generally only available to “accredited investors” under the U.S. federal securities laws. Given the complexity and decreased liquidity in alternative investments, investing in them without experienced assistance should be done with caution given the possibility of increased risk to the investor.  That said, notwithstanding these risks, investors may find that they can benefit from the diversification and noncorrelated return potential of the alternative asset class while also benefiting from the tax advantages of IRAs. Let’s take a look at investing in alternatives in an IRA, and the role of a custodian like Pacific Premier Trust.

Understanding Pacific Premier Trust’s Self-Directed IRA Services

Self-directed IRAs (SDIRAs) can offer investors flexibility and diversification with an array of asset types through the administration of a custodian like Pacific Premier Trust. Investors in IRAs with professional management may also have alternative investments in them, depending on the strategy chosen, but in most standard and Roth IRAs, the selection is typically a limited menu of publicly traded investments.

With the ability to custody alternative assets, investors must closely evaluate the risks and benefits of these investments. Pacific Premier Trust allows eligible clients the ability to invest in alternative assets with custody and administration provided by an experienced provider.

SDIRAs offer these benefits to investors

Flexibility: Investors can allocate their retirement funds to assets not often permitted in an IRA with traditional brokerage firms, including non-publicly traded private assets such as private equity, real estate, and hedge funds.

Diversification and tax-deferred growth: Experienced investors look to alternatives to enhance the potential returns in their IRAs, and take advantage of the tax benefits afforded by their retirement account.

Invest in What You Know

Whether your expertise is in technology, artificial intelligence, real estate, or biotech, Pacific Premier Trust, a provider with over 30 years of experience, can assist investors in taking advantage of opportunities that arise from their own professional expertise, network, and industry connections.

Investor Due Diligence with Alternative Assets

Investors often employ an alternative investment strategy to enhance their potential return within their retirement accounts. Prior to investing, it is crucial for an investor to conduct thorough due diligence of the alternative investment, and consult with their own tax and/or legal advisor for further guidance.

The Role of an IRA Custodian Like Pacific Premier Trust

If investors choose to forego a standard IRA under professional management for a SDIRA, they must first identify a custodian like Pacific Premier Trust that can facilitate opening an IRA account. Like with a standard IRA, Pacific Premier Trust as custodian can aid investors with opening a SDIRA that can hold alternative assets. It is important to understand that Pacific Premier Trust is not a fiduciary and does not provide any kind of investment advice or recommendations.

How soon do you want to invest? Pacific Premier Trust is ready to assist when you are. Contact our specialists for more information.

About Pacific Premier Trust
Pacific Premier Trust, a division of Pacific Premier Bank, is a pioneer in helping investors’ utilization of retirement account funds for real estate, private equity, and other non-exchange traded assets. As the trusted directed-custodian of over $15 billion in assets across 35,000 client accounts, Pacific Premier Trust works with financial institutions, capital raisers, financial advisors, and self-directed investors who elect to leverage tax-advantaged retirement funds in alternative investments. We deliver flexible custodial solutions ensuring a seamless client experience and unparalleled access to private markets, supported by the strength of Pacific Premier Bank. Contact us to learn more.

Legal Disclosure
Pacific Premier Trust performs the duties of a 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. Any communication made by Pacific Premier Trust with regard to opening or using a self-directed individual or business retirement account shall not be construed as a recommendation, call to action, or investment strategy to establish a particular account type. Clients or potential clients are in no way obligated to purchase services from Pacific Premier Trust and are free to purchase such services from any custodian as they deem appropriate. Clients or potential clients are advised to perform their own due diligence in choosing any investment opportunity as well as consulting with legal, tax or financial professionals to assist them with an investment opportunity. Any information communicated by Pacific Premier Trust is for informational and educational purposes only. Alternative investments are not FDIC insured and are subject to risk, including loss of principal. Pacific Premier Trust is not affiliated with any financial professional, investment sponsor, or investment, tax or legal advisor.

1 “Alternative Investments of the Ultra-Wealthy in 2023,” The Motley Fool, October 2, 2023.

2 “Preqin Global Report 2023: Alternative Assets,” Preqin, January 18, 2023.

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