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Professional and Sophisticated Investors (1 Viewer)

Country Lad

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The original post asked why they use the term sophisticated, The reason it is being used is because it has a legal definition, and only because of the legal restrictions.

The people putting the deals together know that their deal doesn’t meet the qualifications to allow them to offer it to retail investors, hence they say something like “open to sophisticated investors only”, remember it was the government that invested the term.

if you are on the ski slopes, and you see a sign saying “experienced skiers only” or it’s marked as a double diamond slope, they are not trying to make the slope seem exclusive, they are letting you know it’s not designed for beginners and might not have the normal safety barriers you expect of the beginner or intermediate slopes, it’s exactly the same with investing.

while you might be interpreting that as them trying to make the deal appear exclusive, it’s actually a legal requirement, and if anything should be seen as more of a “buyer beware” sign.
The term "sophisticated" is obviously an unfortunate, and misunderstood term (but a legal one as VC says) because at some stage on every forum I have been on from the time of hot copper startup this debate with the same comments have popped up.
 
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It’s more than that, there is actually certain investments that you can’t invest in unless you are a wholesale investor, the reason for that is basically so they don’t have to jump through all the hoops of get asic approval to make a retail offer.

for example, I was just looking at putting some money into an unlisted property fund recently, there was several that I was looking at, and some the property funds were only open to sophisticated investors, one of them owned nothing but Telstra Exchanges leased back to Telstra on 25 year leases, from the looks of it the deal was put together pretty quickly when it was done so was never put together in a way to make a retail offer, it’s not about making the investors feel good, it’s about putting a deal together easily, and if it’s a deal that’s good enough to get a lot of wholesale support, why go to the extra fuss of offering it to retail clients?
hi, interesting
how long have you been investing
 
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I have seen credit raises given to "sophisticated investors" at very large discounts.

Where do the SI's find out about these offers, from their accountants, stockbrokers or where?
 

Value Collector

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I have seen credit raises given to "sophisticated investors" at very large discounts.

Where do the SI's find out about these offers, from their accountants, stockbrokers or where?

You can submit your accountants form with your broker, and then when these sorts of deals come up they will let you know.

Also, a lot of the usual funds managers and property investment groups have a mix of retail and whole sale funds, for example if you look through charter halls unlisted property trusts you will see some of them are listed as “whole investors only” that is the same as Sophisticated investors, it’s just different terminology.

if you watch this video from the 14.30 min mark you will hear him describe one of their whole sale funds, most of the others he talks about are retail funds.

 
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I would express some caution about becoming a sophisticated investor, as it follows on that well worn phrase from JP Morgan, "If you have to ask, you can't afford it."

Consider it from the point of view of a broker, REIT, private entity or even someone such as the footloose Melissa Caddick. As always there is a queue, begging them to show favour, and new sophisticates will be last.

Those at the head of the queue, old money, money being laundered, friends and family and fellow worshippers of the supplier, will have first dibs at the offer.

As a new sophisticate you may "just miss out" on what subsequently one can wash through a Hot Copper Sink for double one's investment. Fear not, you will be offered, as last in the queue now moved up to the head, an absolute dog.

Simples.

With the asset and income levels quoted above many public servants, garbos and politicians might be described as "sophisticated".

Caveat Emptor.

gg
 

Country Lad

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I would express some caution about becoming a sophisticated investor, as it follows on that well worn phrase from JP Morgan, "If you have to ask, you can't afford it."

Consider it from the point of view of a broker, REIT, private entity or even someone such as the footloose Melissa Caddick. As always there is a queue, begging them to show favour, and new sophisticates will be last.

Those at the head of the queue, old money, money being laundered, friends and family and fellow worshippers of the supplier, will have first dibs at the offer.

As a new sophisticate you may "just miss out" on what subsequently one can wash through a Hot Copper Sink for double one's investment. Fear not, you will be offered, as last in the queue now moved up to the head, an absolute dog.

Simples.

With the asset and income levels quoted above many public servants, garbos and politicians might be described as "sophisticated".

Caveat Emptor.

gg
Oh dear, tongue firmly in cheek again.
 

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