Alternative investments are having a moment. Their popularity has surged over the last decade, with the asset class growing from just over $3 trillion in 2008 to more than $10 trillion in 2019, according to data provider Preqin.
Institutions have fueled a large part of this growth, investing at record pace into alternatives like crypto, private companies and real estate. Some ultra-wealthy investors have made a windfall investing in alternatives using tax-advantaged accounts, a strategy billionaire Peter Thiel used to grow his Roth individual retirement account from $2,000 to $5 billion in 20 years, tax-free, ProPublica reported last year.
Now, average investors are seeking a slice of these markets, lured by the potential of making outsized returns, which are even more appealing if they come tax-free.
While investing dollars from one’s tax-advantaged retirement account in alternatives has long been legal, it has remained largely inaccessible to average retail investors. Veteran investor Eric Satz realized this in 2013 when he first tried to deploy money from his IRA into private companies and was met with pushback from his financial advisor, who was concerned about the potential risks, Satz told TechCrunch in an interview.
After 10 weeks of research and logistical hurdles, Satz was finally able to make his first tax-advantaged alternative investment through a self-directed IRA.
“At the end of this 10-week process that seemed to have the goalposts constantly moving in terms of what was required in order to make the investment, I wrote the custodian that I was using a check for the privilege of making this investment that I discovered and did all the homework and research on,” Satz said.
