Issue No. 17

Using a self-directed IRA (SDIRA) to invest in private credit can be a savvy move. Most private credit investments are taxed at ordinary income rates, which can significantly reduce returns. However, by using an SDIRA, you can eliminate those tax implications and potentially earn nearly double the yield compared to taxable accounts.  I should say at this point that I am not a tax attorney or CPA and this statement is not tax advice. Please consult a qualified tax professional for personalized guidance.

There are several SDIRA platforms our clients use, though, admittedly, none are great. AltoIRA is currently leading the way on the user-friendly tech front, making it our top rec for clients interested in setting up an SDIRA. Other commonly used platforms include Millennium Trust and STRATA, which are reliable but less user friendly.

Amid the political season, Harris's tax proposal stands out: it would tax long-term capital gains at 33% for the highest earners, effectively aligning them with ordinary income rates. Investors typically take on equity risk to achieve double-digit yields, but if similar returns with downside protection are available in private credit, the incentive to invest in equities weakens. Given the record capital inflows into private credit over the past few years, this policy could further accelerate that trend.

And with increased taxes on the table, SDIRAs become even more valuable!

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- Jillian

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I’ve been frustrated by how difficult it is to automate or replicate certain parts of our business. Every specialty finance deal looks different. Experience helps. But, so does creativity.

There are repeatable components. Running a background check or lien check. Collecting diligence documentation. Ongoing performance monitoring. Even some of the initial modeling.

But, it often takes a team to structure an entire deal, with varying ideas and experiences, and insight into the counterparties needs or challenges. And, we've yet to find a holistic tech solution that can do it all. For such a small business, we have too many software components and still have gaps in our system.

I used to think this was a problem and we had to figure out how to automate it all. For a century, repeatable processes have driven corporate and industrial opportunity and in the next decade, AI and robotics will consume all of that automation.

As I watch AI and robotics take hold and reviewed this piece from Citi, I realize that these structuring challenges we face are actually a moat to competitors and a lifeline to longevity. We may survive because of the lack of automation, rather than in spite of it. My suggestion: find non-repeatable opportunities to build a business upon.

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- Conor