The number
of “accredited” investors in the US has increased significantly over
the past few years, largely driven by high inflation rates. According to new
data from the Securities and Exchange Commission (SEC ), there were over 24
million accredited investor households in the US in 2022, up from 16 million in
2019.
This gives them access to markets that are reserved for only a few. Despite this, the average investors prefer to diversify their savings differently, opting for crypto or gold.
An
accredited investor meets certain financial thresholds and can invest in
private securities like hedge funds, private equity, and venture capital. However,
just three years ago, only 13% of US households had access to private market
investments. The record-high inflation, which drove up prices and consequently
led to an increase in earnings, has resulted in a significantly larger number
of people exceeding the accredited investor threshold. The number of eligible households
has risen by over five percentage points to 18.5%.
Source: SEC
One of the
main reasons behind this rapid increase is that the financial qualifications
for accredited investor status have not kept pace with inflation. To qualify,
an individual must have $200,000 in annual income or $1 million in net assets,
excluding their primary residence. However, these thresholds have stayed static
since they were first introduced in the early 1980s.
Accounting
for inflation, the income threshold would now need to be over $900,000 for a
couple, or the net worth threshold would need to be around $3 million. If
adjusted accordingly, only 5.7% of US households would currently qualify as
accredited.
Nearly half of U.S. households will qualify to invest in sometimes lucrative, often risky private markets deals as accredited investors by 2042, the SEC estimated in a report last week. Currently, just under 20 percent do. 👀https://t.co/qRcvrLji7z
— Declan Harty (@declanharty) December 18, 2023
Freed or Too Much Risk?
Consumer
advocates have raised concerns that allowing too many people access to complex and
risky private investments may lead to issues down the line. Private markets
tend to be much less transparent than public markets, making it harder for
average investors to conduct proper due diligence.
However,
others argue that more investors should have the freedom to diversify their
portfolios beyond traditional stocks and bonds. In the long run, some private
assets like private equity have delivered returns exceeding public market
equivalents.
The SEC just published a report on accredited investors; a few facts on the exempt offering market (which includes syndications and crowdfunding):
– $3.7 trillion of capital raised in ’22, vs $1 trillion in ’21 🤯
– approximately 9.6 million investors participated in Reg D… pic.twitter.com/jb8kvwJgRp
— Aleksey Chernobelskiy (@chernobelskiy) December 15, 2023
As
inflation continues to impact income and wealth, the pool of accredited
investors is likely to keep expanding rapidly. Whether that is ultimately good
or bad for investors remains to be seen.
During Inflation, Investors
Turn to Gold
Regardless
of whether the average retail investor should have access to private markets or
not, record-high inflation is pushing American savers towards alternative
assets. According to a study shared exclusively with Finance Magnates,
83% of millennials express doubts about the current state of the economy.
Consequently, they are exploring new investment and savings avenues, including
gold.
Precious
metals, long considered as a hedge against inflation, are experiencing a
notable increase in interest. Specifically, online queries for “how to invest
in gold and silver” have skyrocketed by 656% over the last year.
A look at
the gold price chart shows this situation is not a coincidence. The precious
metal has grown almost 12% this year, significantly outperforming inflation
and the interest rates of savings accounts. Moreover, it is a safer alternative
to the more rapidly growing but riskier stock market.
The price
of gold is once again hovering above the psychological level of $2,000 per
ounce, and according to experts at StoneX Bullion, it “is showing resilience.”
They also pointed out that on the leveraged gold market, long positions
continue to dominate.
Gold above the $2,000 level. Source: StoneX Bullion, Bloomberg.
In addition
to gold, investors show interest in cryptocurrencies and collectables. One
out of four respondents indicated a heightened interest in alternative assets
following the Silicon Valley Bank collapse in March 2023. Among those who had
invested in the past six months, a third chose alternative investments, with cryptos
emerging as the most popular option.
The number
of “accredited” investors in the US has increased significantly over
the past few years, largely driven by high inflation rates. According to new
data from the Securities and Exchange Commission (SEC ), there were over 24
million accredited investor households in the US in 2022, up from 16 million in
2019.
This gives them access to markets that are reserved for only a few. Despite this, the average investors prefer to diversify their savings differently, opting for crypto or gold.
An
accredited investor meets certain financial thresholds and can invest in
private securities like hedge funds, private equity, and venture capital. However,
just three years ago, only 13% of US households had access to private market
investments. The record-high inflation, which drove up prices and consequently
led to an increase in earnings, has resulted in a significantly larger number
of people exceeding the accredited investor threshold. The number of eligible households
has risen by over five percentage points to 18.5%.
Source: SEC
One of the
main reasons behind this rapid increase is that the financial qualifications
for accredited investor status have not kept pace with inflation. To qualify,
an individual must have $200,000 in annual income or $1 million in net assets,
excluding their primary residence. However, these thresholds have stayed static
since they were first introduced in the early 1980s.
Accounting
for inflation, the income threshold would now need to be over $900,000 for a
couple, or the net worth threshold would need to be around $3 million. If
adjusted accordingly, only 5.7% of US households would currently qualify as
accredited.
Nearly half of U.S. households will qualify to invest in sometimes lucrative, often risky private markets deals as accredited investors by 2042, the SEC estimated in a report last week. Currently, just under 20 percent do. 👀https://t.co/qRcvrLji7z
— Declan Harty (@declanharty) December 18, 2023
Freed or Too Much Risk?
Consumer
advocates have raised concerns that allowing too many people access to complex and
risky private investments may lead to issues down the line. Private markets
tend to be much less transparent than public markets, making it harder for
average investors to conduct proper due diligence.
However,
others argue that more investors should have the freedom to diversify their
portfolios beyond traditional stocks and bonds. In the long run, some private
assets like private equity have delivered returns exceeding public market
equivalents.
The SEC just published a report on accredited investors; a few facts on the exempt offering market (which includes syndications and crowdfunding):
– $3.7 trillion of capital raised in ’22, vs $1 trillion in ’21 🤯
– approximately 9.6 million investors participated in Reg D… pic.twitter.com/jb8kvwJgRp
— Aleksey Chernobelskiy (@chernobelskiy) December 15, 2023
As
inflation continues to impact income and wealth, the pool of accredited
investors is likely to keep expanding rapidly. Whether that is ultimately good
or bad for investors remains to be seen.
During Inflation, Investors
Turn to Gold
Regardless
of whether the average retail investor should have access to private markets or
not, record-high inflation is pushing American savers towards alternative
assets. According to a study shared exclusively with Finance Magnates,
83% of millennials express doubts about the current state of the economy.
Consequently, they are exploring new investment and savings avenues, including
gold.
Precious
metals, long considered as a hedge against inflation, are experiencing a
notable increase in interest. Specifically, online queries for “how to invest
in gold and silver” have skyrocketed by 656% over the last year.
A look at
the gold price chart shows this situation is not a coincidence. The precious
metal has grown almost 12% this year, significantly outperforming inflation
and the interest rates of savings accounts. Moreover, it is a safer alternative
to the more rapidly growing but riskier stock market.
The price
of gold is once again hovering above the psychological level of $2,000 per
ounce, and according to experts at StoneX Bullion, it “is showing resilience.”
They also pointed out that on the leveraged gold market, long positions
continue to dominate.
Gold above the $2,000 level. Source: StoneX Bullion, Bloomberg.
In addition
to gold, investors show interest in cryptocurrencies and collectables. One
out of four respondents indicated a heightened interest in alternative assets
following the Silicon Valley Bank collapse in March 2023. Among those who had
invested in the past six months, a third chose alternative investments, with cryptos
emerging as the most popular option.
