You'll see throughout that the website that we use the term Accredited Investors. While this website is open to everyone, only "Accredited Investors" are allowed to invest in our fund or managed accounts. We thought we'd briefly explain just what the term means and why it's important.
Investopedia has a useful summary explanation of what Accredited Investor means:
An accredited investor is an individual or a business entity that is allowed to trade securities that may not be registered with financial authorities. They are entitled to this privileged access by satisfying at least one requirement regarding their income, net worth, asset size, governance status, or professional experience.
In the U.S., the term accredited investor is used by the Securities and Exchange Commission (SEC) under Regulation D to refer to investors who are financially sophisticated and have a reduced need for the protection provided by regulatory disclosure filings. Accredited investors include high-net-worth individuals (HNWIs), banks, insurance companies, brokers, and trusts.
However, if you want the full legalese straight from the SEC, click this link for the very full definition. Basically, to be an Accredited Investor you must have a net worth by yourself or with your spouse of at least $1.0mn NOT counting the value of your primary residence. Or, you have to be earning AT LEAST $200,000 for the past two years ($300,000 if your spouse is included) and expect to earn at least the minimum standard in the current year.
Of course, that's a simplified version. Have no fear, if you have any doubts about whether you're an Accredited Investor or not, give us a call and we'll have a confidential chat about your status and pull in our counsel if there's any grey area involved long before any investment occurs.
By the way, we're in complete agreement with the SEC that investments like BDC Fund II are not appropriate for all investors. After all, the portfolio can go up and down in value, and we do use margin borrowing which can amplify the risk of loss. Some investors cannot handle opening their monthly statements and seeing red ink and cannot readily absorb the losses that might occur. Investing of any sort at any time is not for the faint of heart and we like to have a good understanding of all our would-be investors "risk appetite" before we proceed.
Even if you technically meet the "Accredited Investor" standard but we feel that an investment in BDC II might not be appropriate for you, we'll be the first to tell you so. On the other hand, if there seems to be a good fit between what we do and your investment goals, BDCIA will send you our prospectus to review. That spells out how the Fund works; the opportunities involved and the risks and everything else you might need to know. Only then, if you're still interested in proceeding, will we assist you in the process of investing your monies in the Fund.