Category: Investor Education
By Raise Private Capital | Raise Insights
Reading time: Approximately 3 minutes
Some private market investments in Australia are available only to wholesale investors. You can qualify in several ways, but qualifying does not mean an investment is safe or right for you.
How do you qualify as a wholesale investor?
Three common tests are:
Assets: You have at least $2.5 million in net assets, confirmed by a qualified accountant. Net assets broadly means the value of what you own minus what you owe.
Income: You earned at least $250,000 a year before tax in each of the previous two financial years, confirmed by a qualified accountant.
Investment amount: You invest $500,000 or more in an investment covered by the relevant rules.
You only need to meet one of these tests to qualify. The investment provider must still confirm that the test applies to your investment and that its requirements are met.
If you qualify through the $500,000 investment test, you do not need an accountant’s certificate to prove your income or assets. However, having $500,000 spread across a portfolio does not automatically qualify you for every investment.
There are also other ways to qualify, including tests for certain professional investors and people with sufficient investment experience.
Do you need a wholesale investor certificate?
If you rely on your income or assets to qualify, a qualified accountant must confirm that you meet the relevant test.
That confirmation may be in a separate certificate, a letter or an accountant’s section within the investment application, provided it meets the legal requirements. An accountant simply signing or witnessing an application is not enough.
Ask the provider what your accountant needs to complete, whose name it should be in and how recent it must be. This is especially important if you are investing through a company or trust.
Check your eligibility to invest.
What is a sophisticated investor?
“Sophisticated investor” has different meanings under Australian law. For some offers of shares and other securities, it describes investors who qualify through their wealth, income or investment amount.
There is also a separate test based on experience. Where this test applies, a business holding an Australian financial services licence must assess whether your experience enables you to judge the investment’s benefits, value, risks and the information you need.
The business must explain its reasons in writing, and you must sign an acknowledgement about the retail investor protections you will not receive. Simply describing yourself as an experienced investor is not enough.
What does being a wholesale investor mean for you?
Wholesale investors can access some opportunities that are not generally available to retail investors. The legal protections can also differ, so it’s important to understand the terms, fees and risks before investing.
Depending on the investment or service:
Providers may not have to supply some disclosure documents normally given to retail investors.
Some legal protections covering financial advice may not apply.
Access to the Australian Financial Complaints Authority may be limited.
You may be treated as a wholesale investor for one investment or service and a retail investor for another. Ask the provider which rules apply and what information is available to help you make an informed decision.
Read ASIC’s Moneysmart guide for more information.
Are wholesale investments safer?
No. Qualifying as a wholesale investor does not mean an investment has been assessed as safe or suitable for you.
Private credit and property-backed investments can involve missed repayments, delays, difficulty withdrawing your money and loss of capital. Read the investment documents and understand the terms, fees and risks before investing.
Explore investment opportunities through Raise
Raise Private Capital gives eligible wholesale investors access to selected third-party private market investments and the documents explaining them. Raise is not the issuer or investment manager of these investments.
Structure Over Speculation.