How to Use Your IRA to Invest in a Private Equity Fund

Step-by-step: what a self-directed IRA is, how Equity Trust works, and how Fund II investors are putting retirement capital to work outside the stock market.

Most people think of their IRA as a bucket for stocks, bonds, and mutual funds. That is what the major custodians (Fidelity, Vanguard, Schwab) are built to hold. What they do not advertise is that IRAs can hold a much broader range of assets, including private equity funds.

The vehicle that makes this possible is called a self-directed IRA.

What is a self-directed IRA?

A self-directed IRA works exactly like a traditional or Roth IRA in terms of tax treatment. Contributions, growth, and distributions follow the same rules. The difference is the custodian.

A self-directed IRA custodian, like Equity Trust Company, allows your retirement account to hold alternative assets: real estate, private equity, private credit, and more, while keeping all the same tax advantages.

A traditional self-directed IRA grows tax-deferred. A Roth self-directed IRA grows tax-free. You are simply expanding what those tax advantages can be applied to.

How it works with Equity Trust

Equity Trust is one of the leading self-directed IRA custodians in the United States. Their process for investing in a private equity fund is straightforward. (Source: Equity Trust: Investing in Private Equity, How it Works)

Open and fund your account at myEQUITY.com, or with the help of an IRA Counselor.
Navigate to the Private Equity section and complete the investment direction using their step-by-step wizard.
Upload the required fund documentation and sign electronically.
A Private Equity Liaison reviews your direction and follows up if anything additional is needed.
Equity Trust disburses the funds to the fund on your behalf. Your IRA now holds the investment.

The process typically takes five to seven business days once submitted in good order.

A few things to know before you invest

The IRS has specific rules that apply to self-directed IRAs. (Source: Equity Trust: Private Entities FAQs)

Your IRA must be properly titled: Equity Trust Company Custodian FBO [Your Name IRA].
You must remain at arm's length from the investment. You cannot use it for personal benefit while it is held inside your IRA.
Some private funds generate UBTI (Unrelated Business Taxable Income), which can create a tax event inside the IRA. Ask the fund sponsor before investing.

Why this matters for Fund II

One of the most underutilized strategies for accredited investors is deploying retirement capital into private equity rather than leaving it in publicly traded assets. A self-directed IRA allows you to put tax-advantaged dollars to work in a real asset fund, compounding in a tax-deferred or tax-free environment.

Several Wingfield Financial investors have done exactly this through Equity Trust, investing in both Fund I and Fund II via self-directed IRA.

If you would like to explore whether this approach fits your situation, we are happy to walk you through it. Get in touch with the Wingfield team.

Sources

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