# Professional and Sophisticated Investors



## Garpal Gumnut (28 June 2020)

I often see the term "professional and sophisticated investors" applied to people in company  announcements and in schemes such as Mayfair Platinum whale fishing outfits.

I am very sophisticated and also an investor. So, do I qualify for that title. 

Or is there a minimum moiety that gulls need to hand over to an investment adviser.

gg


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## tech/a (28 June 2020)

The used car game has a similar 
Terminology 
Wood Ducks.


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## peter2 (28 June 2020)




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## Dona Ferentes (28 June 2020)

the whole point, and you know it, is that the confusion between moneyed and sophisticated is a clever bit of sophistry to confuse the bunnies. And they don't need to hand it over to an adviser; they can do it all themselves. They usually do.


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## Junior (29 June 2020)

"Sophisticated investor".  What a crock!  The $2.5mill can include the PPR.  So basically anyone who purchased or inherited a family home in inner-Sydney 20+ years ago is "sophisticated".


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## Garpal Gumnut (29 June 2020)

peter2 said:


> View attachment 105351



So can I remain an unsophisticated investor and have one of my entities sophisticated.

I don't want to be sophisticated. It sounds so 2001 and "common". 

gg


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## jbocker (29 June 2020)

Ohhh. I always thought that a fundamental requirement was to an absolute something that rhymes with 'banker'.
I trust that this term still applies.


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## Country Lad (29 June 2020)

I wasn't going to say anything but I find the comments interesting.  There have been many posts in the past complaining about the sophisticated investors taking up lucrative issues which people here could not access.  Now you are virtually saying those same sophisticated investors are not very bright or worse.  Is there some jealousy involved here? Just think about the opportunities sophisticated investors have taken advantages of.  Best to be one rather than not I reckon.


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## tech/a (29 June 2020)

I guess more about being able to take up offers than those who cant.
This puts you in the Sophisticated Bracket.
You can buy sophistication.
Ill let the local drug dealer know.


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## dutchie (2 October 2020)

*Billionaire investor Leon Cooperman praised tech stocks, criticized Trump, and disclosed his first gold bet in a new interview. Here are the best 12 quotes.*









						Billionaire investor Leon Cooperman praised tech stocks, criticized Trump, and disclosed his first gold bet in a new interview. Here are the best 12 quotes. | Markets Insider
					

Jeff Zelevansky/Reuters  Leon Cooperman sounded the alarm on the ballooning federal deficit and downplayed the medium-term prospects for US sto...




					markets.businessinsider.com


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## MovingAverage (2 March 2021)

So it turns out a lot of accountants will not sign off on these certificates because their PI insurance will not let them. Curious, can anyone recommend someone that will issue these?


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## kenny (2 March 2021)

MovingAverage said:


> So it turns out a lot of accountants will not sign off on these certificates because their PI insurance will not let them. Curious, can anyone recommend someone that will issue these?



I've seen some accountant sites charge for those letters in their pricing schedules.


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## MovingAverage (2 March 2021)

kenny said:


> I've seen some accountant sites charge for those letters in their pricing schedules.



anyone come to mind?


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## Value Collector (2 March 2021)

MovingAverage said:


> So it turns out a lot of accountants will not sign off on these certificates because their PI insurance will not let them. Curious, can anyone recommend someone that will issue these?



My accountant that I have used for the last 16 years or so had no issue signing mine at the time, I have no Idea why an accountant wouldn't.

The form just basically states that at a given time you owned a certain amount of assets or had a certain income.


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## MovingAverage (2 March 2021)

Value Collector said:


> My accountant that I have used for the last 16 years or so had no issue signing mine at the time, I have no Idea why an accountant wouldn't.
> 
> The form just basically states that at a given time you owned a certain amount of assets or had a certain income.



I hear you...but mine tells me his PI won't allow him. At first I thought this doesn't make sense but after speaking to a few other accountants they've confirmed the same issue


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## Dona Ferentes (2 March 2021)

MovingAverage said:


> anyone come to mind?



Does tend to lead to the obvious question... _You've met the conditions but don't have an accountant?_


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## MovingAverage (2 March 2021)

Dona Ferentes said:


> Does tend to lead to the obvious question... _You've met the conditions but don't have an accountant?_




 what you talkin' 'bout Willis....why do you think I don't have an accountant?


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## Value Collector (2 March 2021)

jbocker said:


> Ohhh. I always thought that a fundamental requirement was to an absolute something that rhymes with 'banker'.
> I trust that this term still applies.



All it really means is that you can be offered deals that are usually reserved for institutional investors / wholesale investors.

If you don't like the term "sophisticated" just use "wholesale".

When investments are structured for retail investors, the issuing party needs to jump through a certain number of hoops and issue PDS's etc that tick certain boxes, however there are a lot of deals that get done at the wholesale level where they are able to skip a lot of the red tape, and put forward offers to the investors much more quickly  but without some of the protections and training wheels etc.

So announcing yourself to the market as a Sophisticated/wholesale investor is just basically saying I am a big boy/girl, and have removed the training wheels and am willing to take a look at some deals and weigh up the risk vs rewards myself and won't try crying to the regulator about not understanding the risks etc if things don't go my way.

-------------------

For example last year a company wanted to extend some financing over Jet engines of a US based airline, they put the loan contracts together offered to institutional and sophisticated investors, using the jet engines as collateral, I think from memory the minimum investment was $20K other deals have been done recently over mining equipment etc.

Offering these types of deals to retail investors would take weeks or months longer than going the wholesale route.


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## Value Collector (2 March 2021)

MovingAverage said:


> I hear you...but mine tells me his PI won't allow him. At first I thought this doesn't make sense but after speaking to a few other accountants they've confirmed the same issue



Weird.


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## MovingAverage (2 March 2021)

Value Collector said:


> Weird.



Yup...have you managed to get one in the last 6-12 months?


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## Value Collector (2 March 2021)

MovingAverage said:


> Yup...have you managed to get one in the last 6-12 months?



no but will be shortly, I will let you now if my accountant has changed his mind.


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## MovingAverage (2 March 2021)

Value Collector said:


> no but will be shortly, I will let you now if my accountant has changed his mind.



Thanks...I’m very curious


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## Country Lad (2 March 2021)

MovingAverage said:


> Yup...have you managed to get one in the last 6-12 months?



My accountant renews mine at the end of each financial  year instead of the statutory  requirement of every 2 years and has been doing so for years.  As far as I know she does this for others as well.


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## MovingAverage (2 March 2021)

Country Lad said:


> My accountant renews mine at the end of each financial  year instead of the statutory  requirement of every 2 years and has been doing so for years.  As far as I know she does this for others as well.



Mine used to do that but has just stopped 😤


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## Dona Ferentes (17 March 2021)

stay alert, folks

Investors face a renewed threat from scammers and so-called money coaches offering unauthorised advice and perpetrating financial frauds as a growing number of people rely on the internet and home computers during the COVID-19 period.


> “_This has been a once-in-a-generation opportunity for criminals to target maximum returns_,” says Stan Gallo, a partner in charge of forensic services at international consultancy BDO.



_Gallo says workplace IT security systems have been stretched by a huge spike in remote accessing and online transactions as unprecedented numbers of employees work from home.

Global regulatory bodies have detected a sharp spike in scams, misinformation and aggressive marketing of risky products, adding to the climate of “extreme volatility” in markets.

BDO’s Gallo says bracket creep means many comparatively modest investors, typically those with gross annual incomes of $250,000 or more for at least two years and net assets totalling $2.5 million, are considered for regulatory purposes to be “*sophisticated*”._


> _“That means they may have access to a larger range of investment options but receive less disclosure and protections than ordinary ‘retail’ investors,” he says._




_*Record low interest rates and sharemarket volatility *means more investors are willing *to take higher risks to boost returns.*_

......
Cyber experts claim about 90 per cent of the risks involved with using computers for financial transactions can be eliminated with simple checks. They include:

Gallo says investors can lower the risk of “phishing”, which is the fraudulent attempt to obtain sensitive information or data, such as passwords or credit card details, by not clicking on links in emails or messages, or opening attachments, from people you don’t know. Also, use a quality security software application. The bogus emails often contain a fake website where individuals are encouraged to enter confidential details.
Use multi-factor authentication, which ensures a user is granted access to a website or application only after successfully confirming identity credentials via two or more pieces of evidence. Tilley, from Secureworks, says shop around until you find a provider that offers the protection.
Small businesses and individuals need to be on alert for “business email compromise”, a common form of attack typically involving the authorised access to a legitimate business account. Once accessed, the account will be used to request fraudulent payments, or redirect legitimate payments to alternative bank accounts. In addition to logging and monitoring suspicious activities, have a second person monitoring invoices to identify irregularities, says Gallo.


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## Dona Ferentes (6 April 2021)

the newest incarnation, on the international stage, is that of *Family Offices*.

The recent blowup of Archegos, dropping $10B of FO money on swaps that went wrong (essentially undisclosed lavish leverage on supercharged speculative bets), has brought these structures to the fore.

Last Thursday, Dan Berkovitz at the US Commodity Futures Trading Commission said oversight of family offices “must be strengthened”, noting that they “can wreak havoc on our financial markets”.

In a report issued a year ago, business school *Insead *noted that the number of single family offices had grown by 38 per cent between 2017 and 2019, to reach more than 7000. Assets under management stood at some $US5.9trn in 2019, the report estimated. That compares with $US3.6trn in the global hedge fund industry, according to HFR.

Family offices are “_growing faster than global wealth, and are increasingly common in all areas_”, Insead stated, adding that rich families are also placing a growing share of their wealth in these types of structures.

This is no small-time cottage industry. On average, they control assets worth $US1.6 billion apiece, according to another 2020 study by UBS, and a handful can stretch into hundreds of billions of dollars. Typically, each family office has two or three offices, often in hubs like Singapore, Luxembourg and London. Chief executives are paid something in the order of $US335,000 a year, according to the Insead report.

Despite the size of these investment houses, family offices tend to operate below the regulatory radar. Unlike mainstream pension funds and investment managers catering to the masses, or more highbrow hedge funds, they do not manage external money. This means that they often answer to no one but the family — apart from standard anti-money laundering rules and sanctions compliance.

Unless they cross thresholds demanding transparency on the size of their stakes in public companies, or they choose to disclose investments, perhaps because of their philanthropic tinge, they do not reveal their bets. They rarely speak to the press and they do not provide updates on performance or holdings.

The knotty issue facing the broader financial system, as Archegos illustrates, is that family offices are not created equal. Many are cautious, seeking only to preserve the wealth they have amassed. Some, however, demonstrate all the speculative aggression typically associated with the most cut-throat hedge fund. Hwang’s Archegos falls into that camp. The banks involved are now investigating whether Hwang misled them, concealing positions held with other banks to rack up vast amounts of leverage in concentrated bets that unravelled alarmingly fast....

_Financial Times_


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## over9k (6 April 2021)

It's a sales tactic. It massages the client's ego/kisses their ass. It makes them feel like william large penis if they use your product. You'll see it all the time whenever something is described as "exclusive". 

Mildly well off people will spend huge money to make themselves look far better off than they actually are. In the right circles, nine times out of ten it's the person with the crappiest car that actually has the most money.


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## Dona Ferentes (6 April 2021)

over9k said:


> It's a sales tactic. It massages the client's ego. You'll see it all the time whenever something is described as "exclusive".
> 
> Mildly well off people will spend huge money to make themselves look far better off than they actually are. In the right circles, nine times out of ten it's the person with the crappiest car that actually has the most money.



I think it's more than that. "_Assets under management stood at some _*$US5.9trn in 2019*". But the beguiling lure of outperformance can usually only be done with taking on risk, and nothing outperforms like a black box, where the risks are disguised until they aren't.


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## Value Collector (6 April 2021)

over9k said:


> It's a sales tactic. It massages the client's ego/kisses their ass. It makes them feel like william large penis if they use your product. You'll see it all the time whenever something is described as "exclusive".
> 
> Mildly well off people will spend huge money to make themselves look far better off than they actually are. In the right circles, nine times out of ten it's the person with the crappiest car that actually has the most money.



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?


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## Smurf1976 (6 April 2021)

Value Collector said:


> it’s not about making the investors feel good, it’s about putting a deal together easily



I can see an element of both to it.

Makes the deal easy as you say.

There'd be at least some for whom being deemed "professional" or "sophisticated" will press their buttons and make them happy even if they don't make any use at all of the benefits it offers.

Regardless of what anyone intends, I can see both applying to varying degrees in practice.


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## Value Collector (7 April 2021)

Smurf1976 said:


> There'd be at least some for whom being deemed "professional" or "sophisticated" will press their buttons and make them happy even if they don't make any use at all of the benefits it offers.



No doubt some people would get a kick out of that, but I really don't think that's why these the main reason these deals are put together as has been claimed here by others.

I mean the deal I mentioned above for the purchase of the Telstra data centres and exchanges was a $700Million deal, and the minimum investment was $100,000 it was clearly aimed at institutional investors like big industry super funds and other wholesale institutions, allowing the individual investors in is only something they want to do if they are making large investments and don't require them to jump through the ASIC hoops.

When these deals are getting put together the last thing they want it to be tying up man hours dealing with 100's of people looking to invest $1000, and the advertising budget to get it out there and having to write super a detailed PDS that is that would be suitable for release to retail investors.

Hence why it makes sense for these institutions to have a list of "sophisticated/wholesale" investors on their books who they can quickly contact and get a quick no fuss investment from.

I guess a lot of people just have a problem with the term "sophisticated", but I guess they would have a problem with most words you tried to replace it with eg professional investor, experienced investor, high net worth investor I don't know.

Can anyone here think of a better word?


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## over9k (7 April 2021)

Just large sum investors. 

There's nothing "sophisticated" about it. It's like a real estate agent describing something as "exquisite". It's ball-greasing.


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## Value Collector (7 April 2021)

over9k said:


> Just large sum investors.
> 
> There's nothing "sophisticated" about it. It's like a real estate agent describing something as "exquisite". It's ball-greasing.



The term sophisticated investor is actually a legal term invented by the USA financial regulator the SEC, not salespeople. it is meant to describe someone with more investment knowledge than average, capable of assessing deals more throughly or at least of a large enough size to be able to absorb added risk.

If look up what sophisticated means, you will see it just means having experience and knowledge or something that is developed to a higher degree of complexity.

for example you could describe a computer system as a “highly sophisticated computer system”, you wouldn’t be trying to “grease it balls” you would  just be describing the fact it is more complex than average and capable of things that more standard computers aren’t.

But as I said before it’s a legal term, but if it makes you personally uncomfortable, maybe use professional investor, wholesale investor, accredited Investor etc in its place.


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## over9k (7 April 2021)

Do you think they actually mean it in the legal sense though? 

Ostensibly you're correct, but in reality... 

It's like how a "significant investment" has a legal definition (which I think is actually 250k iirc) but the term can be used in far more meanings other than the legal.


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## Value Collector (7 April 2021)

over9k said:


> Do you think they actually mean it in the legal sense though?
> 
> Ostensibly you're correct, but in reality...
> 
> It's like how a "significant investment" has a legal definition (which I think is actually 250k iirc) but the term can be used in far more meanings other than the legal.



Yes, it’s illegal for them to offer these deals to people that don’t meet the sophisticated investor criteria, hence why they want written proof from your accountant before they will talk to you.

There is strict legal rules and restrictions about what sort of investment schemes can be offered to retail investors, and there is far looser rules about what can be offered to sophisticated investors.


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## over9k (7 April 2021)

Yes, I'm aware... 

We were talking about how the term is actually used in reality, not the legal stuff.


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## Value Collector (8 April 2021)

over9k said:


> Yes, I'm aware...
> 
> We were talking about how the term is actually used in reality, not the legal stuff.



Such as? Where are you seeing it being used where the legal side doesn’t apply?

The only places I can recall seeing the Term mentioned is in the marketing material of the actual deals where you need to quality to take part, or from banks and brokers that want sophisticated investors as clients because they are hoping to market these deals to them, but can’t legally unless you qualify.


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## Smurf1976 (8 April 2021)

Value Collector said:


> Can anyone here think of a better word?



Haven't got a better term for it but I think it's one of those things where the term will in practice be taken to mean different things by different people.

Other words like that include professional, experienced, rich, hot, cold, large, small etc they're all open to interpretation. What's a small house to some is normal or even large to others. etc.

But if someone's offering me something that isn't available to everyone and it uses terms that imply I'm in some way superior, highly regarded, have achieved something etc well then wrongly or rightly that does look like an attempt to appeal to certain traits that I don't really care about.

Ultimately though it's much like petrol. "Premium" is just a name and means it meats a particular technical specification, that's all and much the same with "sophisticated investors", it just means they meet some specific criteria. Depending on circumstances that might be good, bad or completely irrelevant.


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## over9k (8 April 2021)

Value Collector said:


> Such as? Where are you seeing it being used where the legal side doesn’t apply?
> 
> The only places I can recall seeing the Term mentioned is in the marketing material of the actual deals where you need to quality to take part, or from banks and brokers that want sophisticated investors as clients because they are hoping to market these deals to them, but can’t legally unless you qualify.



I never said the legal side doesn't apply. The OP was essentially questioning why the word sophisticated is being used and I'm pointing out that whilst it has a legal definition, the actual term "sophisticated" is used in place of something more mundane like "large sum" or whatever to describe that 250k+ customer for a reason.

You're really keen for an argument, aren't you?


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## Value Collector (8 April 2021)

over9k said:


> I never said the legal side doesn't apply. The OP was essentially questioning why the word sophisticated is being used and I'm pointing out that whilst it has a legal definition, the actual term "sophisticated" is used in place of something more mundane like "large sum" or whatever to describe that 250k+ customer for a reason.
> 
> You're really keen for an argument, aren't you?



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.


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## Smurf1976 (8 April 2021)

Smurf1976 said:


> meats



That should have been "meets" obviously.


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## Country Lad (8 April 2021)

Value Collector said:


> 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.
> 
> ...



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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## bitgooods (8 April 2021)

Value Collector said:


> 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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## Value Collector (8 April 2021)

bitgooods said:


> hi, interesting
> how long have you been investing



25 years.


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## Austwide (9 April 2021)

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?


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## Value Collector (9 April 2021)

Austwide said:


> 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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## Austwide (9 April 2021)

@Value Collector Thanks for the info


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## Garpal Gumnut (9 April 2021)

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


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## MovingAverage (9 April 2021)

Value Collector said:


> no but will be shortly, I will let you now if my accountant has changed his mind.



Hi @Value Collector , thought I'd check in to see if you've made progress on this?


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## Country Lad (9 April 2021)

Garpal Gumnut said:


> 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.
> 
> ...



Oh dear, tongue firmly in cheek again.


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## Value Collector (9 April 2021)

MovingAverage said:


> Hi @Value Collector , thought I'd check in to see if you've made progress on this?



Not yet.


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