Accredited Investor Rule No Barrier

One of the provisions of Dodd-Frank is a change in the criteria the determine who’s an accredited investor. This might have an adverse impact on hedge funds by shrinking the client pool. But most people don’t think so, according to a survey at a conference.

Managers may have to reconsider their investment base, says Alan Alzfan, a partner at accounting firm McGladrey. For instance, an investor’s primary residence will now be excluded from the calculation of net worth, meaning fewer people will make the net worth threshold for accredited investor.

In addition, the Securities and Exchange Commission is to review the $1 million minimum net worth requirement four years after the enactment of Dodd-Frank. Mr. Alzfan predicts that the SEC will increase the threshold at the review. 

But only a minority of fund managers think the changes will cause them to lose clients. “Will the re-definition of accredited investor significantly affect your ability to raise capital?” Mr. Alzfan asked participants at a conference where people from alternative investment firms were a large part of the audience. Only 25% said yes, while 66% said no.

Judging from that, other criteria for accreditation may be more important than net worth.

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