Why become an accredited investor in Singapore
Endowus Insights

Why become an accredited investor in Singapore

Updated
5
Sep 2022
published
18
Aug 2022
.
What to know before opting in as an accredited investor
  • Accredited investors (AIs) access more financial products than retail investors; AI-only products may improve returns, bring diversification benefits
  • There is less regulatory protection for AIs as they are assumed to be better informed and able to manage the risks involved
  • For more information, contact Endowus Private Wealth for a consultation

Who are accredited investors?

Most non-professional individual investors, generally known as retail investors, are restricted from accessing some types of investments that are exempt from certain regulatory requirements. 

This is to protect retail investors from the risks associated with such products, which include alternative assets such as private equity, infrastructure, or hedge funds. The idea is that the average individual may lack the experience or capital to fully understand and handle all the risks involved.

Accredited investors (AIs), however, have been assessed to have the financial means and the know-how. These affluent individuals are therefore able to access a wider suite of financial products and services, as compared with retail investors.

Regulators in different countries have their own definitions of AIs and qualifying criteria, which often include income, professional experience, and net worth requirements. 

In Singapore, the Securities and Futures Act defines AIs as individuals whose:

  • Financial assets, net of any related liabilities, exceed $1 million (or its equivalent in a foreign currency); or
  • Income in the preceding 12 months is not less than $300,000 (or its equivalent in a foreign currency); or
  • Net personal assets exceed $2 million (or its equivalent in a foreign currency), of which the value of the individual’s primary residence (net of any secured loan) can only contribute up to $1 million.

If you fulfil at least one of these three conditions, you may choose to be deemed as either an accredited investor or a retail investor. 

The Monetary Authority of Singapore (MAS) introduced the opt-in regime in 2019 so that investors must specifically give their consent if they want to be regarded as accredited.

A person who has chosen to be treated as an AI can withdraw their consent at any time, by giving written notice, if they change their mind.

Benefits of being an accredited investor

You may be wondering whether it’s worth opting in for the AI status, and whether it will be suitable for you.

Many investment products are only available to accredited investors. These include certain alternative assets, some bonds, and structured notes. Having access to a wider variety of investments can help with building a better-diversified portfolio and potentially achieve greater returns.

Endowus has a private wealth arm that provides access to more investment products such as alternative investments, many of which are only available to accredited investors.

For example, AI clients at Endowus can directly access institutional share classes of funds that were previously only available to large institutional investors. This means lower fees and higher expected returns.

AIs can also construct investment portfolios that are denominated and/or hedged in major currencies, such as the SGD, USD, EUR, and GBP.

What to know before opting in as an accredited investor

Regardless of your net worth, all investors should give careful thought to all investment opportunities and remember that all investments carry risk. In particular, AI-only products tend to have less regulatory oversight and require a bigger financial commitment upfront.

Importantly, being treated as an AI means that you are expected to have more knowledge, and are able to understand and manage the risks of the financial products you choose to invest in.

Accredited investors are assumed to be better informed and better able to access resources to protect their own interests, and therefore require less regulatory protection. 

Investors who agree to be treated as AIs thus forgo the benefit of certain regulatory safeguards. For example, issuers of securities are exempted from issuing a full prospectus registered with MAS for offers that are made only to AIs, and intermediaries are exempted from a number of business conduct requirements when dealing with AIs. 

Investors should consult a professional adviser if they do not understand any consequence of being treated as an AI.

For more information before you opt in to become an accredited investor, refer to this notice on Endowus.

With Endowus Private Wealth (EPW), clients looking to invest a minimum of S$1 million in assets across our services can gain exclusive access to more personalised solutions and products.

Let us introduce you to a better way to manage your wealth. For more information or to explore the options available to AIs, please contact us for a consultation.

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