Alternative Investments Podcast (Clip 3 of 8) – Accredited Investors and other Special Investor tiers

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Alternative Investments Podcast – With Strategic Capital & Waterloo Capital

Don Simoneaux talks about Special Status Investor Classes for Alternative investments (e.g. Accredited Investors). Learn how to work with Strategic Capital – Registered Investment Advisors in Austin, Texas.

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 Episode 4 Podcast/audio/video Clip (3 of 8)

Working with Strategic Capital on Alternative Investment Strategies

Meet Don Simoneaux – Alternative Investments Waterloo Capital

Not sure how the SEC’s Special Status Investor classification applies to alternative investments (“Accredited Investor”, etc.)? Hear what Don has to say on behalf of Strategic Capital in Austin


Moderator: Perfect. I’m glad you segued there, because I think I want to get into the overall concept of just an accredited investor, a qualified investor, and there are multiple tiers there, if you can kind of walk us through that a little bit. And, on the back of the idea that liquidity is incredibly important, especially in volatile markets, and Alternative Investments aren’t necessarily built to be the most liquid vehicles. Can you talk a little bit about the tier of investing classification for alternative Investments you know, in general, and then talk about the importance of liquidity and how it’s changed over the last say half a decade; or decade. 

Don Simoneaux (Director of Alternative Investments, Waterloo Capital): Yes, certainly. So, the SEC has three designations for investors going into private placements. The highest tier is ‘qualified purchaser’. That’s 5 million in investable assets excluding the primary homestead. These types of products that are going to be QP products are going to, you know, going to be long-term illiquid investments. So, think: private Equity Venture Capital even some types of hedge fund products to where you need a certain threshold in this category of five million dollar threshold to be able to access these products 

Don Simoneaux (continued): The second tier is what’s called a ‘qualified client’ designation. That’s 2.2 million in investment assets excluding homestead. These are going to be sometimes semi-liquid products that a lot of times will have a carry component, where there’s a profit split between the underlying manager and the investor. You know, a lot of times those can align incentives and be appropriate in that circumstance.

Don Simoneaux (continued): And, the lowest tier is ‘accredited investor’ that’s going to be 1 million in net worth excluding homestead or that there’s an income component that differs between single or joint filing but that’s the lowest designation and the progress on the types of investment in the accredited space have really come a long way. You know, private equity is inherently an illiquid asset class, you know, if you think about the concept of private Equity: buying a private company; improving operations; restructuring the balance sheet, and ultimately selling that company off several years later at a premium – and what you purchased it for, you know, that doesn’t offer liquidity. In that interim time frame, however, you know in the accredited space there have been products that will combine investors into these fund structures and diversify out their holdings and a lot of these different alternative strategies where you can get similar type of exposure to some of the more illiquid QP products but in a more palatable wrapper. So, there are certain funds like registered investment corporations or interval funds where it might have an accredited investor designation associated with that, however it does offer a sort of semi-liquid offering where you can get some sort of liquidity on a regular basis; in most cases, quarterly.