When after-tax math inside a self-directed IRA keeps collapsing a three-lane allocation into one

Take an investor with 340k across a traditional IRA and an old profit sharing plan, both movable, and a plan built in three lanes: 40 percent first-position private notes, 40 percent unleveraged passive equity through funds holding cash-flowing residential, 20 percent held as dry powder for a distressed note buy. Run the after-tax math and the allocation tends to want to collapse into all notes. Interest income sits on the exempt side of UBIT, so an 11 percent note compounds at 11 inside the wrapper. Equity funds in this space are commonly 55 to 65 percent levered, and once the debt-financed portion of the income is priced as taxable at trust rates, the effective yield drops enough that the diversification sought costs two or three points a year. Unleveraged residential funds exist, but the ones typically found are targeting 6 to 7 percent. So the honest state of it, structurally, is that the tax mechanics push toward a single-strategy book, and a 340k position that is entirely one borrower type in one part of the credit cycle is a real concentration to sit with. The decision most investors in this spot face: accept the concentration and diversify by borrower and geography instead of by strategy, or eat the UBIT and take the levered equity for genuine strategy diversification. There is not always a clean third answer.