The Role of Accredited Investors in the Future of Investing

You can invest in some of the most exciting investment opportunities if you’re an accredited investor. But what is investor accreditation, and why does it matter?

The SEC recently adopted amendments that expand the definition of an “accredited investor.” These changes include adding categories for eligibility based on professional knowledge, experience or certifications.

The Future of Venture Capital

As the VC industry becomes increasingly accessible, it must work harder to distinguish itself. As a result, it will have to compete with ICOs, which offer investors the opportunity to invest passively in startups without giving up equity or accepting governance terms.

The future of venture capital is likely to see a shift toward a more open, democratic model. This will be driven by greater inclusivity and increased information symmetry in the broader funding ecosystem.

Venture professionals are spearheading the effort to uncover the AirBnBs, Pinterest, and Ubers of the future in their early stages. The payoffs can be staggering. But even so, they are not immune to the cyclical nature of public markets and the pitfalls that can come with them. VC firms protect themselves by investing, which allows them to spread their risk across multiple deals. They also tend to favor companies that can attract other outside investments, as this can help them secure larger exits.

The Future of Private Equity

Private equity firms are known for bringing lean, focused management to corporate operations. They can avoid some of the missteps that occur when a firm is responsible for multiple business units. They can focus their energy on driving revenues, cutting costs and reducing the number of employees.

Private-equity investors focus on buying companies at below-market valuations. They also tend to be efficient custodians of their portfolio companies. They do not overextend by squeezing out every bit of profit through add-on deals or multiple arbitrages (buying a company and then selling it at several different valuation points).

Critics of private equity argue that its focus on short-term profits destroys long-term value and harms workers. But industry defenders point out that public pension funds invest a significant share of their assets in private equity. And that they need returns to serve retirees. They also note that their ability to fund companies when banks are unwilling helps stabilize credit markets.

The Future of Real Estate

Emerging technologies and shifting homeowner demographics have shaken real estate trends in recent years. Investors should focus on assessing and adapting to these changes.

New technology will help facilitate more efficient real estate transactions for all parties involved. This will include virtual reality software that allows users to view staged rooms and renovations. This software may also be used to assist property developers in designing their projects.

Another area of the industry that will benefit from new technology is private lending. If family offices pool their finances to qualify as accredited investors, it could add significant investment capital to the RECF and other real estate-based private lending platforms. Additionally, new apps that use blockchain networks will increase trust and streamline the process of transferring deeds and other legal documents. This will enable users to do most of the work from their smartphones. This will save time and money for all parties.

The Future of Insurance

Traditionally, the insurance industry has focused on insuring against risk. But in this new age, insurers must also be prepared to innovate to survive. They must adapt to shifting consumer expectations, increasing competition from insurtechs, and the force of COVID-19-driven virtualization.

To do so, many insurers have partnered with insurtechs to develop intuitive digital experiences for their customers. The results of such efforts will create a customer base that is more loyal and profitable for the insurance company.

In August 2020, the SEC expanded the definition of accredited investor to allow people based on professional certifications or financial knowledge to qualify for certain private investment opportunities. This change will help reduce the systematic risk exposure of investors solely relying on public markets. This is an exciting prospect for the future of investing. However, it comes with some challenges as well. Investors who are too liberal with their definition of accredited investor may end up with deals they cannot handle.