E4: Who can invest in Alternative Assets?

Alt Investing Made Easy

In this conversation, Sarah Florer and Roland Wiederaenders discuss the topic of accredited investors in the alternative asset space. They explore the reasons behind the restrictions on who can invest in alternative assets and the legal basis for these requirements. They highlight three reasons that limiting investment in alternative assets to accredited investors makes sense: 1) accredited investors have a higher tolerance for risk of loss, 2) accredited investors have resources to hire advisors, and 3) accredited investors can invest larger tranches of money, which supports the management of investments with a smaller group of investors. They also discuss the criteria for individual investors to be accredited, including net worth and income thresholds. In this part of the conversation, Sarah and Roland briefly touch on non-US investors and the potential for them to invest in alternative assets in the United States and highlight the importance of financial health and wealth building for individuals worldwide. They also discuss the different types of Rule 506 offerings, including 506B and 506C, and the consequences of including non-accredited investors in offerings for alternative investments. They mention the limitations on advertising for 506B offerings and the requirement for accredited investor verification in 506C offerings.

Takeaways

• Accredited investors have a higher tolerance for risk of loss and can afford to invest without jeopardizing their financial stability.
• Having resources to hire advisors is important for understanding the risks and making informed investment decisions.
• Private investments do better with a smaller group of investors, which is why the entry points are usually higher.
• Individual investors can be considered accredited based on their net worth or income levels.
• The criteria for accredited investors help protect investors and ensure the success of alternative asset investments. Non-US investors can also invest in alternative assets in the United States.
• Financial health and wealth building are common interests for individuals worldwide.
• Rule 506 offers different options for including non-accredited investors.
• 506B offerings have limitations on advertising.
• 506C offerings allow for advertising but only accept accredited investors.
• Accredited investor status must be verified in 506C offerings.

Chapters

00:00 Introduction and Background

01:27 The Importance of Accredited Investors

03:06 Reasons for Restrictions on Alternative Asset Investing

06:31 Legal Basis for Accredited Investor Criteria

10:29 Private Securities and Consumer Protection

13:01 Risk and Liquidity in Alternative Asset Investing

16:19 Managing Investments with a Smaller Group of Investors

18:16 Practical Considerations for Accredited Investors

22:21 Understanding Accredited Investor Criteria

25:55 Criteria for Accredited Investors: Net Worth and Income

26:23 Conclusion: Protecting Investors and Ensuring Success

26:45 Investing in Alternative Assets for Non-US Investors

27:31 The Global Interest in Financial Health and Wealth Building

29:11 Understanding the Different Types of Rule 506 Offerings

34:32 The Limitations of Advertising in 506B Offerings

36:10 The Consequences of Including Non-Accredited Investors

42:15 Accredited Investor Verification in 506C Offerings