Qualified Purchaser

A Qualified Purchaser (QP) is a more stringent tier of investor classification under the Investment Company Act of 1940. Natural persons must hold at least $5M in investments; institutional entities (trusts, companies, family offices) must hold at least $25M. Funds relying on the Section 3(c)(7) exemption — which allows up to 2,000 investors — require all investors to be QPs.

Most SPV funds and smaller vehicles use the Section 3(c)(1) exemption (capped at 100 beneficial owners), which requires only accredited investors. Larger vehicles with more investors — or funds that want more LP flexibility — use 3(c)(7) and therefore require QPs. The distinction matters when evaluating which private funds you can legally access.

Illustrative example: a fund targeting $200M from up to 500 LPs would need to rely on the 3(c)(7) exemption and require all LPs to be QPs. An LP with a $4M investment portfolio — accredited, but not QP — would be unable to invest. An LP with a $6M investment portfolio qualifies as a QP and may invest.

The edge the pros know: the QP threshold creates a meaningful bifurcation in the market. The largest, most sought-after secondary funds — with the best deal flow and negotiating leverage — tend to be 3(c)(7) vehicles accessible only to QPs. Accredited-only vehicles (3(c)(1)) are more accessible but are often capped at 100 investors, limiting their scale and deal selectivity.