Hedge Funds and Self-directed IRAs
Published on October 31, 2017
Did you know that you can make investments in hedge funds through a self-directed IRA? It’s one of the many alternative investments allowed in these types of retirement plans. And it is big business. According to the 2017 Preqin Global Hedge Fund Report, total assets under management in the industry is valued at more than $3.2 trillion. The term “hedging” refers to the practice of attempting to reduce risk while maximizing ROI.
Hedge funds use pooled funds from multiple accredited and institutional investors, managed with the goal of generating high returns. Hedge funds may make investments in domestic and international markets and vary by investment strategies and styles. Savvy investors with particular interests or investment goals in mind choose hedge funds that meet their particular criteria, as there is great diversity in terms of risk as well as investments. Hedge funds are often set up as private investment limited partnerships open to a limited number of investors. The initial investments are typically tied up for at least one year (the lock-up period). In most cases, more long-term leverage is the key to these funds.
Hedge funds may invest in futures, options, currency trading, real estate, and more … a slew of alternative assets and the kind that are compatible with self-directed retirement plans. In addition to hedge funds, the wide range of investments that may be included in a self-directed retirement plan includes (and is certainly not limited to):
- Real estate – residential, commercial, industrial
- Commodities – agricultural, energy, metals
- Precious metals
- Private placements
- Commercial paper
- Equity funding
If you’re considering self-directing your retirement account and have an eye on hedge funds as part of your portfolio (or any alternative asset you already know and understand), the professionals at Next Generation Trust Company can help you get started. Simply open a new self-directed retirement plan and provide the instructions to fund your account as detailed on our forms. We carefully review each transaction to ensure compliance with IRS guidelines, execute the transaction, and hold the assets through Next Generation Trust Company. Your transaction is streamlined, as we handle both full account administration and custody the assets for our clients.Back to Blog