Inflation, stock market volatility among top reasons investors adding private markets to their IRAs
IRAs that allow alternative investments, commonly referred to as self-directed IRAs (SDIRAs), are among the fastest-growing types of retirement accounts. In fact, private market investing platform Yieldstreet has seen a more than 39% uptick in SDIRA account creation in 2023 compared to the prior period.1
To understand more about what is driving this trend and gain insight into investor goals, we surveyed a random sample of more than 120 high-net-worth investors with an SDIRA.
Key insights from survey
A range of concerns are driving action
SDIRA investors reported inflation, stock market volatility, and a potential recession as their top concerns with regard to meeting their retirement goals.
Other less common responses included concerns related to upcoming elections and resulting potential tax changes.
Investors are primarily seeking SDIRAs to diversify or hold a particular asset
While diversification with alternative investments was previously challenging in a retirement account, new innovations are making these assets readily available in IRAs.
It is also common for investors to open an SDIRA to purchase a particular asset, like a rental property.
Real estate is top alternative for IRAs; crypto falls last
SDIRAs open investors to a much broader universe of potential investments that can help guard against stock market drawdowns and keep pace with inflation.
Most notably, real estate has historically shown lower correlation to the stock market. Regular rent increases — especially with multi-family properties — are often used to help meet inflation levels.
To achieve higher potential returns, investors are comfortable with longer lock-ups
The trade-off with private market investments is generally less liquidity (also known as the “liquidity premium”). However, surveyed investors indicated they are open to longer lock-ups, with the majority selecting they were comfortable with a 4+ year hold.
About the survey
Survey conducted in late March and early April 2023 by Equity Trust and Yieldstreet. Total of 121 respondents. Approximately 75% of respondents were accredited investors, or have a net worth above $1M and/or income above $200k ($300k combined if married).
1. Source: Yieldstreet. Figure represents new, funded SDIRA accounts opened in 2023 compared to the prior period in 2022.
Alternative investments involve specific risks that may be greater than those associated with traditional investments; are not suitable for all clients; and intended for experienced and sophisticated investors who meet specific suitability requirements and are willing to bear the high economic risks of the investment. Investments of this type may engage in speculative investment practices; carry additional risk of loss, including possibility of partial or total loss of invested capital, due to the nature and volatility of the underlying investments; and are generally considered to be illiquid due to restrictive repurchase procedures. These investments may also involve different regulatory and reporting requirements, complex tax structures, and delays in distributing important tax information.
Diversification does not ensure a profit or protect against a loss in a declining market.
What's Yieldstreet?
Yieldstreet provides access to alternative investments previously reserved only for institutions and the ultra-wealthy. Our mission is to help millions of people generate $3 billion of income outside the traditional public markets by 2025. We are committed to making financial products more inclusive by creating a modern investment portfolio.
2 Represents an average net realized internal rate of return (IRR) with respect to all matured investments in your portfolio, utilizing the effective dates and amounts to and from the investments and net of management fees and all other expenses charged to the investments. Past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. All securities involve risk and may result in significant losses, including the loss of principal invested.[read more]