Qualified Purchasers and Accredited Investors: What’s the difference?

As you set up your hedge fund, it’s important to understand the difference between an Accredited Investor and a Qualified Purchaser, and why it matters for your fund. In this post, we outline the main differences between the two.

Posted on
Read time
4 minutes

What Is An Accredited Investor?

Accredited investors can invest in securities that are not registered with the SEC and are not offered to the general public. These unregistered securities are expected to be riskier and are not held to the same disclosure standards that publicly traded investments are. The SEC put forth a series of requirements to ensure that investors are sophisticated enough to understand the risks involved with investing in unregistered securities.

To be considered an Accredited Investor, the following qualifications must be met:

#1 Income

Accredited investors must have an individual annual income over $200,000. If filing with a spouse, the joint annual income must be above $300,000.

This income must be made for two consecutive years, and it is expected that the same minimum income will be made in the upcoming year.

#2 Net Worth

In addition to proof of income, accredited investors must have a net worth (or joint net worth) of over $1 million. The value of the individual’s primary residence does not count towards this value.

#3 Private Companies

Private companies can also be considered accredited investors. Private businesses with assets above $5 million qualify as accredited investor entities.

What is a Qualified Purchaser?

Certain funds are exempt from registering with the SEC (Regulation D) as long as the fund’s investors are accredited investors or qualified purchasers. Qualified purchasers have higher financial thresholds compared to accredited investors and it is generally accepted that it’s more difficult to qualify as a qualified purchaser than an accredited investor.

To be considered a qualified purchaser, at least one of the following qualifications must be met:

#1 Investments

The individual or private business must own at least $5 million in investments. Investments can include stocks, bonds, loans, futures, cash, real estate, and other assets. Similar to standards for accredited investors, “investments” does not include the primary residence and or property used for business.

#2 Active Investments

The purchaser must invest at least $25 million—whether this be their own money or on the behalf of someone else. This extends the classification to those who are professional investment managers or corporations who invest client’s money.

#3 Purpose

A trust that is sponsored and managed by qualified purchasers can be considered a qualified purchaser itself. In order to be considered for this, there must be reasonable proof to confirm that the trust was not formed solely to enable the purchaser to invest in the fund. 

Accredited Investors v Qualified Purchasers

Becoming an accredited investor has comparatively less barriers to entry due to its lower financial qualifications. Because of this, qualified purchasers may sometimes be referred to as “super-accredited investors”.

Qualified purchasers also tend to have more opportunities to invest as certain funds can accept up to 2000 qualified purchasers while others can only accept up to 100 accredited investors.

Thinking about launching your own private fund?

Interested in launching your own private fund? Get in touch with the Repool team today.

Looking for modern launch or backoffice solutions?


Repool, Inc. (“Repool”) serves as an administrator to various pooled investment vehicles.  The content on this site, or any associated distribution platforms and public Repool online social media accounts, platforms, and site (collectively, “Distribution Channels”), is provided for information and discussion purposes only, and should not be construed as or relied upon in any manner as legal, business, tax, investment, or other advice. Repool’s services and information available on Distribution Channels are not a substitute for third-party professionals (including properly licensed and/or registered lawyers, brokers and tax professionals), and you should seek your own professional advisers, including legal counsel. Repool is not licensed to provide legal advice and is not registered as a broker-dealer or investment adviser, and Repool is not otherwise licensed or registered.

Any views expressed in posted content, such as articles, blogposts, commentary, videos, or social media, are those of individual Repool personnel or third-party authors and are not the views of Repool or our affiliates, unless explicitly stated otherwise. Additionally, with respect to any content or views available on Distribution Channels, Repool makes no representations that the information has been validated by independent, licensed third-parties, nor that such information has any enduring accuracy or appropriateness for any given individual or situation.

Laws and regulations applicable to the sale of securities, forming pooled investment vehicles (including private funds), and investment management (including serving as an investment adviser or commodity trading advisor) are complicated and occasionally ambiguous. Relevant law may come from the state, federal, or international level, and you may be under the regulatory oversight of one or many regulatory bodies such as, but not limited to, the Securities and Exchange Commission and the Commodity Futures Trading Commission. It is your responsibility to ensure that, when forming, offering interests of and managing any pooled investment vehicle, whether supported by Repool’s administrative services or not, you are in material compliance with applicable laws including obtaining any and all applicable licenses, permits, registrations, memberships, and approvals that are required in order to form, offer securities of and manage such pooled investment vehicle.  You should not rely upon Repool in making any such determinations or as a replacement for licensed, third-party professionals.

Building the future of fund services

© 2024. Repool, Inc.