Can someone set up a "professionally managed fund" where you can set up an LLC, have the fund invest your 401k in that LLC, pay yourself a salary equal to the amount invested? Bypassing early withdrawal fees for some nominal fee?
Private Equity Investing Now Allowed in 401(k) Retirement Funds
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Re: Private Equity Investing Now Allowed in 401(k) Retirement Funds
#32Can someone set up a "professionally managed fund" where you can set up an LLC, have the fund invest your 401k in that LLC, pay yourself a salary equal to the amount invested? Bypassing early withdrawal fees for some nominal fee?
If you want to go to prison for securities fraud, sure.
Re: Private Equity Investing Now Allowed in 401(k) Retirement Funds
#33Can we now subject large "private" firms to the same scrutiny that "public" have to obey? I always thought it was ridiculous that you could call a trillion dollar company with millions of shareholder, "private." From the sounds of it, this ruling handwaves away the inherent risk of investing in a company whose finances you have no visibility into by claiming that putting it into a diversified private fund is the same…
Private firms with more than $10 million in assets and more than 2000 investors (excluding employees) are already subjected to the same scrutiny as public firms have to obey. (The complication here, of course, is that a retirement fund may be a single investor for legal purposes even if it's managing many people's assets.)
Re: Private Equity Investing Now Allowed in 401(k) Retirement Funds
#34Private equity isn't an appropriate asset class for 401(k)'s. Public markets have a threshold for rules/regulations and reporting requirements. You don't want your retirement account to be a casino. You want companies that can provide stable, long-term growth of your portfolio-- so the money's there when you need it.
"Investing" in publicly traded companies (most volume is just between people with no affiliation to the board and are not buying from company stock offerings) and especially holding an index fund is not really investing, in the sense that it does not allocate any resources intelligently or do anything to seed growing companies. It's simply an attempt to grow personal wealth that doesn't do anything to improve the eco…
>just buying the S&P index is actually more economically harmful.
What
Re: Private Equity Investing Now Allowed in 401(k) Retirement Funds
#35Can someone set up a "professionally managed fund" where you can set up an LLC, have the fund invest your 401k in that LLC, pay yourself a salary equal to the amount invested? Bypassing early withdrawal fees for some nominal fee?
I suspect you phrased this poorly:
1. I set up an LLC.
2. I have a regular job which is earning me income.
3. I put some of that income into a 401K.
4. I direct the 401K to invest in my LLC.
5. As the guy running the LLC, I take that amount of money and pay myself a salary equivalent to what I put in.
How is that money ever going to grow? What's the benefit? You didn't pay taxes? Pretty weak benefit, IMO.
There is such a thing as self directed retirement. People buy real estate with it all the time. The regulations require, though, that any profits made out of it must go back into the retirement account until you're old enough to withdraw. I could use retirement money to buy a broken house, fix it up, and flip it. But all profits have to go back into that account. I cannot keep any for myself.
Re: Private Equity Investing Now Allowed in 401(k) Retirement Funds
#36Earlier quoted context omitted.
"Investing" in publicly traded companies (most volume is just between people with no affiliation to the board and are not buying from company stock offerings) and especially holding an index fund is not really investing, in the sense that it does not allocate any resources intelligently or do anything to seed growing companies. It's simply an attempt to grow personal wealth that doesn't do anything to improve the eco…
>just buying the S&P index is actually more economically harmful. What
Think about what it means to buy into an index fund. When my next paycheck comes in, I'm going to use 20% of it to invest in the stock of some S&P 500 companies, even though I don't know most of their names and have no idea what results can be expected from them. Tossing money blindly at random companies isn't completely unproductive, since capital is valuable, but in terms of the underlying social purposes of investing it doesn't accomplish much.
Re: Private Equity Investing Now Allowed in 401(k) Retirement Funds
#37Earlier quoted context omitted.
Startup investing is a subset of private equity investing. Pe includes many illiquid subcategories including real estate, LBOs, startup investing, even niche stuff like infrastructure investing
> Startup investing is a subset of private equity investing Not as the term is used in finance. Venture and PE are separate asset classes. Venture-like assets can become PE-like, in the same way private equity can become public equity. But PE is based on cash flows and leverage; VC is based on growth.
No one said VC, PE most certainly does invest in startups with exactly that focus on cash flows and leverage. The ones I have experience with tend to look at "older startups" think something like a 7-year-old company that don't really have a hope of a large cash payout but is still viable as a business. It seems to be one transition path for a traditionally VC backed company to resemble a regular small business.
I have personal experience with at least two startups that had undergone that experience and are still around right now.
Re: Private Equity Investing Now Allowed in 401(k) Retirement Funds
#38I'd buy SpaceX stock, if Elon would allow.
Google owns a 7.5% stake so you can get exposure that way
Re: Private Equity Investing Now Allowed in 401(k) Retirement Funds
#39Private equity isn't an appropriate asset class for 401(k)'s. Public markets have a threshold for rules/regulations and reporting requirements. You don't want your retirement account to be a casino. You want companies that can provide stable, long-term growth of your portfolio-- so the money's there when you need it.
Private equity is commonly how the rich got rich. Theres all sorts of asset classes not available to the common public that keep them from reaping rewards. Another being investing in catastrophe bonds and insurance. Tons of fortunes made off all sorts of financial assets, that really arent that esoteric, they are just in the shadows.
Anything I would have made will get eaten up (and then some) by large fees.
Re: Private Equity Investing Now Allowed in 401(k) Retirement Funds
#40Earlier quoted context omitted.
Startup investing is a subset of private equity investing. Pe includes many illiquid subcategories including real estate, LBOs, startup investing, even niche stuff like infrastructure investing
> Startup investing is a subset of private equity investing Not as the term is used in finance. Venture and PE are separate asset classes. Venture-like assets can become PE-like, in the same way private equity can become public equity. But PE is based on cash flows and leverage; VC is based on growth.
Not according to the CFA Institute, or any number of other sources. LPs may incorrectly label PE and VC as separate subsets, but most large, institutional LPs will have PE, then separated by type.
CFA is the best source, but there are so many others, including my professional experience at a major asset manager.
https://www.cfainstitute.org/en/membership/professional-deve...
> Definitions of private equity differ, but in this reading we include the entire asset class of equity investments that are not quoted on stock markets. The private equity class stretches from venture capital (VC)—working with early stage companies that in many cases have no revenues but have potentially good ideas or technology—all the way through to large buyouts (leveraged buyout, or LBO) in which the private equity firm buys the entire company. In some cases, these companies might themselves be quoted on the stock market, and the private equity fund performs a public-to-private transaction thereby removing the entire company from the stock market.