Who Invests In Alternative Investments?
Most alternative investment assets are held by institutional investors or accredited, sophisticated, high-net-worth individuals because of their complex nature, lack of regulation, and degree of risk. Many alternative investments also have higher minimum investment and fee structure when compared to standard investments.
Key Takeaways
A sophisticated investor is a person who has “sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment.” This characterization also assumes the individual has the capability of absorbing a sizable loss without experiencing financial ruin.
An accredited investor is an individual with a net worth exceeding $1 million — excluding the value of their primary residence. Additionally, an individual with gross income exceeding $200,000 in each of the two most recent years, or joint income with a spouse or partner exceeding $300,000 for those years, are also considered accredited.
