For those who are not familiar, there is an aspect of investing that not everyone is capable of pursuing, yet can be highly profitable. An Accredited Investor is someone who has a net worth of over $1 million, or earns a yearly income greater than $200,000 individually or $300,000 jointly. This class of investors have access to what are called Alternative Investments, which consist of opportunities like Hedge Funds, Private Equity, Real Estate, and other asset classes as seen in the attached articles. Why is this such a big deal? Because over the past years, Private Equity Investments have had higher average returns than the S&P 500, which has allowed the top 1% of individuals to widen the income gap in the United States. Yes these investments are more risky, which is why they are seeing higher returns, but the fact of the matter is there are highly intelligent people managing these investment funds, and are more times than not, are successful at doing so.
Just to put this into context, people like Dan Gilbert have started companies like Quicken Loans and have earned outrageous amounts of money. However, he then saw the extraordinary results of Private Equity, so over the past few years he has been purchasing a vast amount of the real estate properties in Detroit, which have appreciated in millions of dollars in value since the resurgence of the city. The accredited investors are set to make back their initial investment and much more, making a lot of people a whole lot of money. I could only think about whether or not it's fair that not everybody could take part in such a great opportunity.
My questions for the caucus are as follows:
1. Should the requirements for becoming an Accredited Investor be less so that more people have access to Alternative Investments?
2. Are Alternative Investments inherently too risky for individuals who don't have a lot of money?
3. Since such large investments at times have a great impact on the cities in which they reside, do you think that some of the money from these investments should be distributed to local infrastructure in the area, thus providing a higher standard of living for those who weren't directly involved, but ultimately funded the businesses as customers?
I'm excited to read what people think!