High-net-worth investors

There are various type of investors in the marketplace, many of which you’ve probably heard of many times. One example is described by the term: high-net worth, whether they’re referred to as individuals, investors, clients, etc. Although everyone probably has some conception of what being high-net-worth is, it’s probably beneficial to examine what the term actually means, and how to approach it from an investment perspective.

Although there’s no set rule to this, according to Terry Cain in the Globe and Mail, a person traditionally described as high-net-worth usually has net investable liquid assets of at least $1 million, which excludes the value of a principal residence, registered accounts such as RRSPs and RESPs, and net of all debt. However, some firms up the ante, so to speak, and define a high-net-worth individual or family as having liquid investable assets of at least $5 million, while an ultra-high-net-worth individual or family as having a liquid net worth of more than $25 million.

More opportunities

As the article points out, the ways in which high-net-worth individuals approach investing obviously differs from that of the average investor, but it’s not just about quantity. Yes, higher net-worth individuals often possess the same kinds of assets and investments as others. But they also have access to opportunities others don’t.

For example, private equity, venture capital, high-yield debt, infrastructure, real estate, agriculture, commodities, currencies and hedge funds are all listed as investment opportunities more accessible to high-net-worth individuals. They not only provide higher returns than more commonly-available investment platforms, but investments such as venture capital allow high-net-worth people to also invest their time and expertise in the ventures they’ve invested in.

Seizing the moment

Also according to the article, Tiger 21, a networking organization for more than 500 high-net-worth investors, has issued a breakdown of their members’ investments: real estate, 30 percent; public equities, 23 percent; private equities, 21 percent; cash and cash equivalents, 10 percent; fixed income, nine percent; hedge funds, five percent; commodities, one percent.

As you can see, even high-net-worth individuals appear to adhere to the practice of diversification, with a good mix of public, private and various other holdings.  It’s just a matter of seizing opportunities that might not be available to other types of investors.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.


The exempt markets — explained

There may be some confusion surrounding what exempt markets are, how they work, and what kind of opportunities they present to investors. Perhaps a brief explanation, and some perspective, is in order.

First, in Canada, exempt markets are a specific classification for investments mostly surrounding the reporting requirements of any particular investment security or opportunity. So, in essence, an investment opportunity that meets the classification of an exempt market is, as the name suggests, exempt from certain requirements, especially that of the issuance of a prospectus.

Investor knowledge and protection

Does that mean that investment securities without a prospectus are less secure, so to speak? No. In fact, as many knowledgeable investors are aware, the existence of a prospectus certainly doesn’t guarantee investors are properly informed, nor does it in any way constitute a formula for investing success. It’s simply a reporting requirement in most public markets, while extremely safe and well disclosed investment opportunities are offered in the private markets too — without prospectus.

This doesn’t mean that securities offered in the private or exempt markets come without due financial reporting. Many of them, such as mortgage investment corporations (MICs), come with a rather standard offering memorandum. Exempt market securities also often come with accredited investor requirements, minimum transaction thresholds, and are done in the private markets where rather large investors — both individual and institutional — can have access to structured investments more suited to their specific needs.

The right people

Of course, what makes the path towards the exempt markets much more navigable is dealing with financial professionals and managers who know their way around and can offer investors the knowledge, experience and performance needed for success.

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