Investors are increasingly looking to diversify their retirement accounts with nontraded alternative assets like real estate and private equity, according to a survey released Tuesday by PENSCO. In the survey of almost 1,000 investors, 62% said they’ve increased their allocation to nontraded alts or have plans to do so. Another quarter plan to increase their allocation in the next five years.
“Our survey found that compared to last year, investors now experience fewer hurdles to investing in nontraded alternatives, and they possess a better understanding of how to use an IRA to invest in various alternative asset classes,” Kelly Rodriques, chief executive officer of PENSCO, said in a statement.
Rodriques said the increase in use of nontraded alternative investments in IRAs is a result of both more volatility and a better understanding among investors of how they work.
“As the market continues showing signs of volatility and as individuals increasingly understand the potential benefits of adding alternative assets to their portfolios, we anticipate that self-directed IRA investors will continue pursuing nontraded alternatives that have different risk and return profiles from traditional stocks and bonds,” he said.
In addition to looking for more diversification, investors said they were interested in nontraded alts for their opportunity to invest in businesses, sectors, and industries they’re familiar with.
Real estate and private equity are the most popular asset classes, particularly real estate. More than half of respondents said they will increase their allocation to real estate investments, including single-family investment property and nontraded REITs. A quarter said they will increase their private equity allocation with investments in startups or funds.
PENSCO noted that new account activity at the firm has shown similar trends. Over a third of new accounts at PENSCO in the first nine months of the year were invested in private equity, and 32% in real estate.