We recently spoke with Bob Paulus of PPR Capital Management about fund strategy, investor education, and the growing role of self-directed IRA capital in private investing. Here are a few highlights from the conversation.
Q: What asset class do you focus on?
A: For the Reliant Fund, we focus on non-performing first mortgages on single-family properties, along with multifamily and build-to-rent properties. For the Opportunity Fund, which is a closed-end fund, we also have car washes that offer some upside participation.
Q: What is your target return profile?
A: Investors receive a fixed 12% return, with the ability to compound to a little over 14%. From an underwriting standpoint, we target mid-to-high teens in the Reliant Fund and 18% to 24% in the Opportunity Fund, which also includes upside sharing.
Q: How are the funds structured?
A: The funds are structured as a typical 506(c).
Q: What does your typical investor look like?
A: Our typical investor is an accredited investor looking for alternative investments to diversify their portfolio. We see a broad mix of backgrounds, including entrepreneurs, doctors, and engineers—people who are thoughtful with their money and understand the value of diversification.
Q: What opportunities and challenges have stood out in capital raising over the last 24 months?
A: One of the biggest opportunities is that the pool of investors is getting wider as alternative investing becomes more popular. The bigger challenge is education. Many people were raised to think their 401(k) should stay in stocks and bonds, so there is still a need to explain the role and benefits of alternative investments.
Q: What takes the most education when talking to investors?
A: Investors tend to focus on two things: return and risk. Return is easy to explain. The harder part is helping them understand portfolio diversification, non-correlation between asset types, and how capital is being preserved. That “why” matters.
Q: When did you first start accepting IRA capital, and what have you learned?
A: We started raising self-directed money in 2008, about six months after forming the company. One of the biggest things we learned is that investors appreciate the appeal of double-digit, tax-advantaged returns.
Q: What advice would you give sponsors who are just starting to tap into IRA capital?
A: Make preserving investor capital the top priority. That has to be the foundation.
Q: What do investors often misunderstand about using IRA money?
A: Many people assume it is a complicated process, when in reality it is much simpler than they think. In Bob’s description, the core steps are opening the self-directed account and transferring funds from the traditional account. The simplicity is often what surprises people.
Q: How important is IRA capital to your overall capital stack?
A: Bob said PPR has more than $550 million of equity under management, with roughly 25% to 30% of that coming from IRA money. He also noted that IRA capital tends to be “sticky,” with many investors rolling into another term after a positive track record.
Q: Who should be introduced to the self-directed IRA conversation?
A: Everyone is a potential IRA investor. Many people assume their retirement funds are stuck at firms like J.P. Morgan or Schwab, so simply explaining that self-direction is an option can open up additional investment capacity.
