The management of Americans’ retirement dollars is undergoing a fundamental trans- formation from a world of defined benefit plans, which asked little effort of participants, to a landscape dominated by defined contribution plans that require individuals to develop their owninvestment strategies. This year marks the 40th anniversary of the 401k, and, today, many workers are entering retirement with only definedcontribution assets. This shift pressures individual investors to secure their financial future largely without access to the institutional expertiseand strategies that effectively served past generations. According to the Investment Company Institute, since 2007, defined benefit planholdings have dropped from 39 percent to 31 percent of retirement assets, while assets in defined contribution and IRA accounts have grown substantially. There has been a 700 percent increase in defined contribution plan participants since 1975. During that same period, the number of defined benefit participants has fallen by 44 percent, according to the Department of Labor.
Fortunately, the portfolio diversifying investments (PDI) industry continues to evolve in order to provide individual investors and their financial advisers with access to institution- al-style investment strategies to better diversify their portfolios, delivering superior risk-adjusted returns and long-term outcomes. Direct participation programs (DPPs) — including 1031 exchange/DST products, Regulation D offerings, energy programs, private debt funds and qualified opportunity zones (QOZ) — offer a range of options to accredited investors.
I have found, however, that information on the latest trends and analyses of the market for DPPs and other private placement investments can be difficult to find. That is why the Institute for Portfolio Alternatives (IPA) is proud to partner with Real Assets Adviser to deliver this timely special report. Our goal is to educate registered investment advisers, broker-dealers and family offices on the distinctive features of DPPs and the role private placements can play in the management of America’s retirement assets.
You will read about the staying power of 1031 like-kind exchanges; the growing popularity of Regulation D offerings; a renewed interest inenergy programs; and the unique qualities of private debt investments. We also examine qualified opportunity zones — a new investmentand economic development tool established by Congress as part of tax reform. Qualified opportunity zone funds could be a significantcontributor to urban renewal across the country, while at the same time offering tax-advantaged investment returns. Finally, we will update readers on the latest legislative and regulatory developments affecting DPPs.
The PDI industry has a lot to be excited about. We continue to be a big — and growing — tent that is evolving to offer innovative products historically beyond the reach of individual investors. DPPs play a critical capital formation role in today’s economy and can serve as thecornerstone of a well-constructed investment portfolio.
Beyond this special report, the IPA has a range of educational opportunities dedicated to DPPs in the months ahead, including: dedicatedprogramming at the IPAVision 2018 and Due Diligence Symposium; upcoming webinars on issues unique to the DPP community; and continued public advocacy in the media, in Washington, D.C., and across the 50 states. Quite simply, we will continue to lead this importantconversation.
We hope you enjoy the special report.