Am I Eligible to Explore Alternative Investments?

By Avantis Wealth - November 16, 2021

The asset class of Alternative Investments is relatively new territory in comparison to traditional investment opportunities, especially for those new to the market or those eligible to invest in this particular asset class for the first time.

In line with the regulatory requirements of Section 21, those looking to explore this realm of investment opportunity must first qualify as one of the following:

HIGH NET WORTH INDIVIDUALS

High Net Worth individuals are those who fall into the bracket of an annual income to the value of £100,000 or more, excluding any money withdrawn from pension savings (unless withdrawals are used directly as income in retirement). These individuals also hold net assets to the value of £250,000 or more, excluding their primary residence, money secured through a loan on that property or any additional benefits.

CERTIFIED SOPHISTICATED INVESTOR

A sophisticated/accredited investor is an individual who has been certified by a firm to possess sufficient knowledge to understand the risks involved with engaging in activity in non-mainstream pooled investments.

SELF-SOPHISTICATED INVESTOR

We then fall into the area of self-certified sophisticated investors. Simply put, these are individuals who are a member of a network or syndicate of business angels. They have made one or more investments in an unlisted company in the prior 2 years. Have worked or is working in a professional capacity in the private equity sector or in the provision of finance for small or medium enterprises or is currently or has been the director of a company with an annual turnover of at least £1m.

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FOR EXAMPLE

Michael lives in a great middle-class area in a nice house and drives a practical used car which he bought several years ago. Michael is a regular guy. He is self-employed, runs a factory with over 50 staff and is located in the same town he grew up in. Michael also has a net worth of £4.5m (not including the positive equity in his primary residence).

Sarah, who is a doctor with many years of experience under her belt and comfortably on a salary of +£100k though she does have substantial student debt. She owns a nice but not opulent flat within a large coastal city in a nice neighbourhood and takes public transport to her place of work. Sarah also likes to walk as much as possible, wears nice clothes and considers herself a normal urbanite.

Jeff & Anna met at University and shortly after got married. They both work full time, have 2 school-age children and are now in their mid-40s. They live on the outskirts of town in a medium sized neighbourhood. Tim works as an IT director at a national company whilst Nicole is a full-time PR director at a private company. Both Jeff & Anna have nice used cars and have a combined home income of £200k/year.

They all have something in common. They are an accredited / sophisticated investor and are eligible to engage in alternative investments.

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