Private funds are offered by private placement, not to the public. To stay within the exemptions that allow that, a manager can generally only accept investors who meet an eligibility test — broadly, investors deemed able to evaluate and bear the risk of an illiquid, higher-risk investment. The labels differ by jurisdiction, but the idea is the same.
United States — 'accredited' and 'qualified'
- Accredited investor: under the US securities-law framework (Regulation D), an individual generally qualifies via an income test or a net-worth test (excluding the primary residence), or by holding certain professional credentials; entities qualify by asset size or because all their owners are accredited.
- Qualified purchaser / qualified client: higher thresholds that unlock larger or differently structured private funds. The exact tests and figures are set by US regulation and change over time.
South Africa and Zimbabwe
South Africa uses concepts such as qualified or professional investors within its financial-sector regulation, with the South African Reserve Bank and the FSCA relevant to cross-border flows and conduct. Zimbabwe’s framework similarly restricts private offerings to sophisticated or institutional participants. A single cross-border deal may have to satisfy all three regimes at once, which is why managers screen carefully at the outset.
How eligibility is established here
In practice the gateway establishes eligibility through self-certification plus verification. The investor completes a self-certification questionnaire stating the basis on which it qualifies (net worth, income, or professional / institutional status) and declaring source of wealth and source of funds. The manager then runs know-your-customer (KYC) and anti-money-laundering (AML) checks, including sanctions and politically-exposed-person screening, before opening the data room or accepting a subscription.
Why source of wealth and source of funds matter
- Source of wealth explains how the investor’s overall wealth was generated (a business sale, a career, inheritance).
- Source of funds explains where the specific money for this investment is coming from (a named, traceable account).
- Both are core AML requirements: they let the manager confirm the money is lawful before it enters the structure.
Eligibility tests and thresholds are jurisdiction-specific and change. This is general information, not legal or investment advice, and self-certification does not by itself make an investment suitable for you. Complete the investor questionnaire honestly and take independent advice on your own status.