Qualified purchasers (QPs) are a subset of accredited investors. In the simplest terms, qualified purchasers are investors with at least $5M in assets (excluding their primary residence), although there are other ways to meet the qualifications (listed below).
Generally, a qualified purchaser is an investor that meets any of the following criteria:
- an individual or family-owned business not formed for the specific purpose of acquiring the interest in the fund that owns $5,000,000 or more in investments;
- a trust not formed for the specific purpose of acquiring the interest in the fund which is sponsored by and managed by qualified purchasers;
- an individual or entity not formed for the specific purpose of acquiring the interest in the fund which owns and invests at least $25,000,000 in investments (or someone who is acting on account of such a person); or
- an entity, of which each beneficial owner is a qualified purchaser.
Why does this matter?
The SEC has limitations on the number of investors in an investment vehicle (syndicate or fund). A fund or syndicate may only have 249 non-QP investors, while a fund with only QP investors can have up to 1,999 investors.