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New Managers October 2015

PENSCO COLUMN: IRAs represent billions of untapped capital for hedge funds

 

Eileen Loustau

Retirement accounts might not be the first source that comes to mind for those looking to raise funds, but they may represent billions of untapped capital.

Unlike traditional retirement accounts, self-directed IRAs, retirement accounts that give US investors control over their investment choices, allow investors to use tax-advantaged money to buy alternative assets. These IRAs can hold everything from private corporate stock to hedge funds to limited partnerships.

PENSCO, an alternative asset custodian for clients' IRAs, has seen investors increasingly turn to private equity and other alternatives for diversification and potentially higher returns of late.

The firm, which has offices in San Francisco, Denver and Portsmouth, NH, was founded by Tom Anderson in 1989. Initially, it helped clients purchase direct real estate with their retirement accounts. But then PENSCO has diversified over the past 10 years, and now also helps people purchase private equity, private funds, secured notes, lending, etc.

The IRS provides a fair amount of flexibility with regards to the assets held in a self-directed IRA, explains Eileen Loustau, SVP, marketing director at PENSCO. "The guidelines are actually fairly broad so long as it is for investment purposes only, and the IRA holder is not participating in any self-dealing. And there's a variety of prohibited transactions that would nullify the ability to hold it."

Some of the transactions prohibited in a self-directed IRA would include living in a property that is held in your account, purchase private equity shares of your own business, and loan money to yourself for example.

Once asset managers have found an offering, PENSCO will perform a review to determine if the investment is "administratively feasible" and can be held in a ......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.
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