- Nashville-based Alto announced it raised $5.4 million in funding led by Jefferson River Capital and Moment Ventures.
Nashville-based Alto — a technology platform that simplifies and streamlines the process for investors to add alternative assets to their IRAs — announced it raised $5.4 million in funding led by Jefferson River Capital (the family office of Blackstone Executive Vice Chairman Tony James) and Moment Ventures.
Jefferson and Moment invested $1.25 million each. And Foundation Capital, Sequoia’s Scout Fund, and Amplify.LA also joined the round.
The Investment Company Institute (ICI) revealed that Americans have more than $28 trillion of assets in retirement accounts, including $9 trillion in IRAs. Americans have always been allowed to invest in alternative assets with an IRA, but only about 1% of IRA assets are invested that way due to the complexities in the paperwork and processes in setting them up and executing transactions.
“Since researching and co-authoring Rescuing Retirement, Tony has been focused on the retirement system in the US and concerned that more Americans than ever are approaching retirement with inadequate savings,” said Jefferson River Capital president David Wittels. “The existing 401(k) and IRA system requires Administrators to offer predominantly short-term, liquid investments, a structural bias that leads to subpar returns in comparison to pension funds and endowments invested in longer-term, less liquid alternatives.”
Alto’s streamlined system utilizes automated technology to distill the process to its simplest form. And Alto makes it easier and much less expensive for investors and issuers.
“We’re thrilled to have Tony’s support and for Jefferson River and Moment Ventures to share our belief in democratizing alternative asset investing,” added Alto CEO Eric Satz. “They’ll play a vital role as we give more people the access and help they need to invest their retirement savings in alternative assets, like venture capital, crowdfunding, and real estate.”
Alto’s Alternative IRA (known as “AltoIRA”) is considered an individual retirement account that gives investors the freedom to invest in alternative assets like startups, private companies (including private equity and VC funds), real estate, marketplace loans, and digital currencies. Plus the company also makes it simple and fast to invest on investment platforms like AngelList.
Why should investors consider alternatives in their IRAs? The increase of index-based investing has made it more difficult to achieve above-market returns. And decades of experience and market analysis demonstrate the value of adding sources of non-correlated returns to portfolios. Plus many fast-growth companies which would typically move to the public markets are remaining private longer due to a surplus of private capital.
The potential for significant returns in alternatives is also enhanced by the tax advantages of IRAs, particularly Roth IRAs in which returns are not taxed at all. And by definition, IRAs are also considered a long-term investment account and this fits the liquidity characteristics of most alternatives, such as startups, real estate, and lending.
Earlier this year, Alto raised $2.8 million in a seed round of funding. Investors in that round include NerdWallet founder Jake Gibson, Foundation Capital, Sequoia’s Scout Fund, and Amplify.LA.
