Self Directed IRA – KKR Report – Now’s The Time to Diversify

Kohlberg, Kravis & Roberts, is venerable global investment firm that focuses on assets popular among Self Directed IRA investors: Real estate, infrastructure, private equity, energy, credit strategies and hedge funds.

Recently, KKR’s head of their global Macro and Asset Allocation Team, Henry H. McVey, penned the firm’s 2016 outlook, in which he characterized the markets for 2016 as “Adult Swim Only.” That’s not exactly great news for most folks. But our clients and those who use Self Directed IRA strategies in general to diversify their personal investment portfolios should feel very gratified. As we saw over the last few weeks, large cap U.S. stocks can be very unforgiving to investors at times. We always recommend investors diversify into many different asset classes.

The short version: The current economic expansion is getting pretty old. 79 months and counting, by KKR’s analysts’ count.

Some highlights from the KKR study follow:

The edge in credit markets will go to non-traditional, non-bank lenders to “leverage the market’s illiquidity premium to earn compelling risk-adjusted returns. “ That bodes well to our clients who use their IRAs to do private lending. As banks pull in their horns, investors will pay that much more to nontraditional lenders in order to borrow money.

KKR sees opportunities for private lending/financing in real estate, infrastructure, corporate takeovers and equipment leasing as particularly attractive, relative to risks.

The company’s analysts believe that global GDP will actually be much lower than the consensus estimate. That’s trouble for people in traditional stock market funds, which many see as close to fully valued. Or at least they were until last week’s bear attack! Fully-valued markets do not handle disappointing news well. KKR has been reducing its risk budget accordingly, and raising cash.

The U.S. Fed is tightening as other countries are loosening their monetary policies, which is a bullish sign for the dollar vs. other currencies, though it’s tough on U.S. exporters.

Volatility is increasing, while returns are falling. “The efficient frontier has flattened out; there is now less return per incremental unit of risk taken,” asserts McVey. He projects volatility to increase, while absolute returns in many asset classes will fall.

“After the sell-off, credit looks more attractive than equities.” Meanwhile, traditional conservative debt options like government bonds are likely to lose money in 2016, says McVey. That favors Self Directed IRA owners who engage in hard money lending, micro-lending, private placement debt and debentures, mortgage lending, tax liens and certificates and the like. KKR is increasing their exposure to asset-based lending. That is, their portfolio will become better collateralized as we head into 2016.

Equities are expensive relative to the risk. Again, that’s a prompt to our Self Directed IRA clients and anyone sitting on the fence: If you’re sitting on a conventional Wall Street IRA portfolio, chock full of the usual 60/40 mix of large cap stocks and conservative bonds, like risk-adverse financial advisors have been pushing for years, now’s a great time to give us a call and begin the process of diversifying your portfolio.

Serious investors looking for some insights on how to diversify their Self Directed IRAs would be well advised to read the whole thing, here. It’s long, but don’t worry. There are lots of charts!

Then give us a call. We work with investors all over the country who have successfully diversified their retirement accounts into non-traditional assets of all types. Now’s the time to take steps to trim sails and weather the rougher seas ahead. Visit or website at, or call us at 866-7500-IRA(472).

We look forward to working with you.