What is a qualified purchaser?

The definition is in section 2(a)(51) of the Investment Company Act. It also covers some family-owned companies with $5 million in investments and certain trusts. The test counts investments, as the SEC defines them, rather than net worth, so it is generally a higher bar than accredited investor status. A fund relying on section 3(c)(7) must be owned only by qualified purchasers.

Say a person owns $4 million of stocks and $1 million of bonds. That is $5 million in investments, enough to be a qualified purchaser on the test for individuals. Simple example. Terms vary by fund.

Funds sold only to qualified purchasers have no 100-investor cap, so the test decides who can get into many large private funds.