Are you a hedge fund qualified investor
? This is a question you need to ask if you find yourself interested in investing in a hedge fund in the near future.
Unlike other types of investments, such as stocks and bonds, you are not necessarily a qualified investor. Instead, you need to meet several criteria before you can ever begin to consider this investment strategy.
It may not sound fair, but hedge funds are not for everyone. If you don’t meet the SEC’s guidelines for an accredited investor, you cannot invest in a hedge fund at the present time.
Additionally, some hedge funds have their own requirements on top of those set by the SEC. This is their way of ensuring that every investor is a qualified purchaser.
Are you an Accredited Investor?
This is the primary question you need to answer as you attempt to determine if you are a qualified hedge fund investor.
Simply put, an accredited investor is somebody who is able to enter into a hedge fund thanks to their financial standing. You can be considered accredited if you meet one or more of the following requirements:
1) A new worth of at least $1 million, owned solely or jointly with a partner
2) Earned at least $200,000 per year over the past two years
3) Earned at least $300,000 per year over the past two years in combination with a spouse
4) Has the expectation of earning the same amount of money, or more, in future years
Are you a Qualified Purchaser?
The criteria above is set forth by the SEC. Now, you have to consider if a hedge fund has set its own standards to ensure that investors are qualified.
A qualified purchaser is typically somebody with $5 million or more in investable assets. If you meet the criteria of a particular hedge fund, you may be referred to as “super accredited.”
Depending on the firm, you may run into a case where a hedge fund does not set particular criteria for a qualified purchaser. However, they have another rule in place requiring any new investor to put in a minimum amount of money, such as $1 million. This helps eliminate those who do not have enough liquid assets from investing.
Not everybody is a hedge fund qualified investor. The SEC has its own guidelines in place, and most hedge funds add to this with their own standards.
If you have dreams of investing alongside some of the biggest names in the industry, such as Michael Novogratz
, George Soros
, and Eric Sprott
, you will need to meet very specific requirements. Once you can consider yourself a hedge fund qualified investor
, you can begin to invest your money
in this manner.
Inversely, if you're interested in piggybacking off of hedge funds without paying their hefty fees, there's one very particular market-beating strategy that you should check out
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