Raising Private Capital with Self-Directed IRAs
Estimated reading time: 4 minutes
Raising capital for investment opportunities has always been a challenge, and 2023 proved no exception.
In 2023, global private equity fundraising fell by 22%. Venture capital fundraising saw a steep decline of nearly 60% year-over-year.
As we move into 2024 and beyond, industry experts predict a return to more stable conditions. Some investors are increasingly looking towards high-growth opportunities in private markets to maximize their returns.
One often-overlooked source of funds is 401(k) and IRA accounts. Many investors mistakenly believe these funds can only be traded through public securities. In fact, these retirement funds can be invested in any asset the IRS allows, including high-growth real estate and private equity offerings.
All they need is a self-directed IRA (SDIRA).
As an investment sponsor, you can tap into this trend by leveraging SDIRAs, providing a significant boost to your capital-raising efforts.
In this blog post, we’ll explore the benefits of educating your investors about SDIRAs and provide potential solutions to increase exposure for your offerings.
Table of Contents
- Tap into Trillions of Dollars of Retirement Funds
- The Benefits of Self-Directed IRAs
- Powerful Investment Platforms Join Forces
- Showcase Your Opportunity to Over 22,000 Investors
- Register Your Offering in Minutes
- Enhance Your Capital-Raising Solutions with SDIRAs
Tap into Trillions of Dollars of Retirement Funds
Over $37 trillion in assets are currently sitting in tax-advantaged retirement accounts. For a sense of scale, that is equal to about 80% of the total valuation of the U.S. housing market. Over $11 trillion of those retirement assets are already held in IRAs.
This immense pool of capital represents a significant opportunity for investment sponsors. However, the vast majority of these funds are currently invested in publicly traded securities; though that may be starting to change.
Over the past decade, private market assets have tripled in value, and analysts at Preqin predict these markets will surpass $18 trillion by 2027. Many investors are interested in expanding into private market opportunities with their retirement funds. Private offerings may provide higher returns and reduce exposure to the volatility of the public markets, helping diversify your portfolio.
However, many investors are still unaware they can use their retirement funds to invest in private market opportunities such as real estate and private equity. This is where self-directed IRAs come into play.
The Benefits of Self-Directed IRAs
With an SDIRA, investors have the flexibility to invest in any asset the IRS allows, including private market offerings.
As an investment sponsor, you can educate your clients about SDIRAs, empowering them to invest in your offerings with their existing retirement funds. Doing so can boost their buying power and enable them to potentially benefit from tax-advantaged growth.
You may also be able to seek out investment from new SDIRA investors. SDIRA investors are typically focused on long-term growth and retirement planning. This can align well with the illiquid nature of many private equity and real estate investments.
Plus, investments held in an SDIRA can grow tax-deferred or even tax-free, depending on the type of account. This tax efficiency can be a significant incentive for investors to allocate more funds towards alternative investments, thereby increasing the capital available for your offerings.
Powerful Investment Platforms Join Forces
As a leading SDIRA provider, we believe in breaking down barriers for alternative asset investors.
So, we set out to simplify and streamline the capital-raising process for investment sponsors. However, there was a missing piece: a solution that effortlessly bridges the gap between sponsored offerings and investors' retirement funds.
Enter OpenAlt, an Entrust affiliate.
Their intuitive platform, paired with our industry-leading Entrust Client Portal, creates a streamlined investing experience. Investment sponsors benefit from a seamless experience within OpenAlt, covering everything from registration to offering documents and ultimate funding. Meanwhile, SDIRA investors enjoy the simplified processes of the Entrust Client Portal, making it easy to open, fund, and invest.
This integration ensures a simple investing experience for both sponsors and investors, from fund setup to tracking investment progress.
Showcase Your Opportunity to Over 22,000 Investors
Collaborating with us allows you to list your offering on Entrust Connect, our dynamic investment marketplace available to over 22,000 Entrust clients. This significantly enhances your visibility and the chances of connecting with the right investors for your project.
When our clients show interest in your offering, they can:
- Access Detailed Investment Documents: View comprehensive information that you’ve provided to answer any questions about your investment opportunity.
- Ask Questions: Engage directly with you to clarify any details, conduct due diligence, and gain a deeper understanding of the offering.
- Invest Directly Through Our Platform: Once they’re confident in the offering, they can seamlessly proceed investing with your opportunity, streamlining the entire process.
This approach not only makes it easier for Entrust clients to find their next investment opportunity but also alleviates the burden on your capital-raising efforts.
The Entrust Client Portal is designed to simplify transactions and keep both you and your investors well-informed at every stage. Our automated systems expedite the funding process and reduce the time it takes to close on investments, ensuring a smooth and efficient capital-raising experience.
Register Your Offering in Minutes
Raising capital for your offering on OpenAlt is a straightforward process. Here’s a step-by-step guide:
- Set Up Your OpenAlt Profile: Start by signing up with OpenAlt and creating your company profile. This will serve as the foundation for your investment offerings.
- Add Your Opportunity: Once your profile is set up, add your investment offering to the OpenAlt platform. The process is straightforward and adaptable to any investment structure, ensuring a seamless setup.
- Invite Your Investors: Increase the visibility of your project by inviting your network of potential investors. For larger lists, you can easily import contact information from an uploaded spreadsheet, making it efficient to reach a broad audience.
- Track the Account Establishment Process: Monitor the progress of each investor's account setup seamlessly through the platform, ensuring you stay informed at every stage.
- Optional: Showcase Your Offering to Entrust Clients: To maximize exposure, consider listing your offering on Entrust Connect, our online investment marketplace. This can help you reach a wider audience and boost your chances of success.
Enhance Your Capital-Raising Solutions with SDIRAs
By leveraging the power of 401(k) and IRA funds, you may capitalize on a massive, relatively untapped source of funds. This not only enhances your potential for successful capital raising but also may help your investors achieve their long-term financial goals through diversified and strategic investments.
Have questions about SDIRAs or how Entrust can help you raise capital? Reach out to one of our SDIRA experts and gain a dedicated point of contact. They can give you a virtual tour of OpenAlt, Entrust Connect, and answer any questions about SDIRAs you might have.
Or, if you want to learn more about SDIRAs, download our SDIRA Basics Guide. Inside, you’ll find an extensive list of investment options, IRS rules, and a simple step-by-step process to get started. Download and share the guide with your existing investors to educate them about a new investment strategy, and tap into a potential new source of capital.
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