Eric Satz is Founder and CEO of AltoIRA, which provides investment access with retirement savings to private market assets for all.
Self-directed individual retirement accounts (IRAs) allow investors to put their retirement savings in private market assets like real estate, private equity, venture capital and crypto. The demand for self-directed IRAs has steadily grown as it has become easier for retail investors to open these accounts and tap into alternative markets.
Anticipated major economic shifts will likely accelerate this trend in investor preferences.
Economic Shifts Impacting Private Market Investment Strategies
Investors must navigate several challenges in 2025 that make private market investment strategies through a self-directed IRA more appealing.
Inflation
Inflation has been stubbornly high since the Covid-19 pandemic. Prices could rise even more throughout 2025 due to tariffs and a global trade war. Consumers expect inflation to rise as high as 6.5% by year-end, according to an April 2025 survey from the University of Michigan.
Inflation badly damages the returns of traditional fixed-income investments like bonds. It can also be a drag on stock market returns. On the other hand, physical assets like real estate hold their value during inflationary periods.
High Interest Rates
Market interest rates are still high by recent historical standards, despite Federal Reserve rate cuts at the end of 2024. The Fed may need to keep rates high or even increase them to battle ongoing inflation. That would reduce bond prices and squeeze profit margins for companies, hurting their stock prices.
Certain private market assets have more room to navigate high interest rates. Private credit funds may issue floating-rate debt, which allows them to earn more when rates go up, versus fixed-rate bonds that are locked in.
Market volatility
Market volatility and uncertainty remain high as investors don’t know what to expect under new government policies. The VIX, a measure of market volatility, is around its highest level since 2022. Diversification across assets and markets remains the best protection against severe losses as it limits exposure to one area.
Private market assets have a low correlation to traditional markets and can smooth out performance. For example, a hedge fund following a long-short strategy could still earn money during market declines, balancing out stock losses.
How Economic Changes Are Influencing Investor Behavior
Investors are adjusting their behaviors, portfolios and retirement plans in the face of economic changes. Preqin, a financial data analytics company recently acquired by BlackRock, forecasts that the global private asset market will nearly double over the next few years, going from $16.8 trillion in 2023 to $29.2 trillion in 2029.
Financial research sheds light on the value of using a different approach. A KKR study at the end of 2022 compared risk and returns from 1927 to 2021 for a portfolio of 40/30/30 stocks, bonds and private market assets, versus a standard 60/40 portfolio of stocks and bonds. The portfolio with private market assets had higher average annual returns with less volatility, especially during periods of high inflation.
Historically, inflation and market uncertainty create fear, pushing investors to more stable physical assets. While gold is a popular choice when investors are scared, other alternatives such as infrastructure and real estate offer similar protection. More importantly, they can generate income, whereas precious metals do not.
Why Investors Should Lean Into Private Markets In Self-Directed IRAs
Investors concerned about the 2025 economic trends could benefit in several ways by opening a self-directed IRA (SDIRA) for their retirement savings.
• Tax Advantages: An SDIRA offers the same tax benefits as a traditional IRA: tax-deferred growth and an upfront tax deduction on contributions. Investors can tap into alternative markets while saving on taxes.
• Diversification: Investors reduce risk and the chance of significant losses by adding uncorrelated assets to a portfolio. A self-directed IRA with alternative assets does so by not having all eggs in the traditional market basket.
• Long-Term Growth: Many alternative investments offer higher growth potential. While these investments require a long-term focus, they can outperform the stock market over time.
• Inflation Protection: Alternative assets perform especially well when inflation is high. An SDIRA provides this protection for retirement investors.
At Alto, we strive to make investment options easy and cost-effective. For example, investors can now open an SDIRA in minutes thanks to online platforms like AltoIRA.
An Investment Strategy For Today’s Challenges
The coming months will force investors to manage inflation, uncertainty and interest rate risk, a painful combination. Fortunately, modern investment strategies and capabilities are up to the task.
Through an SDIRA, investors can tap into alternative markets previously only available to high-net-worth individuals. These other assets provide further diversification and are another hedge against economic risks.
Investors should consult with their financial professionals to see how to optimize their portfolio for current market conditions and determine what role an SDIRA could play in expanding their retirement plan.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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