Qualified Investor

Qualified Investor - Urupukapuka Island (in the Bay of Islands) New Zealand
Qualified Investor

According to the regulation of the Securities and Exchange Commission (SEC), United States residents may invest in hedge funds only if they are qualified (or accredited) investors. To be a qualified investor, an individual must meet one of the following two criteria: First, the net worth of the individual (or joint net worth with his or her spouse) must exceed U.S. $1,000,000.

Second, the net income of the individual must be more than U.S. $200,000 in each of the last two calendar years (or joint net income with his/her spouse in excess of U.S. $300,000 in each of these years). The income criterion also requires that the individual reasonably expects to reach the same income level in this year.

the reason for restricting hedge fund investments to qualified investors is that the people who meet these requirements should be able to evaluate the risk of investing in hedge funds and understand the underlying strategy. Furthermore, qualified investors should be able to bear the economic consequences of investing in hedge funds, including the risk of a total loss.

However, these requirements are not directly designed for people wishing to invest in hedge funds; they also apply to investing in other complex and nontransparent securities, such as managed futures and venture capital funds.

Comparable regulations in other countries are the “qualified investor register” of the British Financial Services Authority (FSA) and the “Register qualifizierter Anleger” of the German Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin).