The three tiers in brief
- Accredited investor. The entry threshold for most private offerings, including non-traded BDCs and many feeder vehicles.
- Qualified client. Governs whether an adviser may charge performance-based fees, including incentive fees. Relevant because most private credit vehicles charge such fees.
- Qualified purchaser. The highest tier, required for funds relying on Section 3(c)(7) of the Investment Company Act.
Full definitions and current dollar thresholds are in the companion classifications guide and in the equity volume's Chapter 5. Read The Complete Guide to Private Equity for RIAs. Verify thresholds at the time of each investment, since the SEC adjusts several of them for inflation.
Why credit is different
Private equity's best-known vehicles are private placements with high eligibility bars. Private credit is not. Traded BDCs are listed securities with no eligibility restrictions at all. Non-traded BDCs and interval funds are registered offerings that frequently reach accredited investors and, in some registered formats, investors below that standard, subject to state and offering-level suitability standards.
That is the practical meaning of democratization on the credit side: the eligibility gate that constrains private equity allocations is often not the binding constraint here.
Which raises the real question
When eligibility is no longer the filter, suitability must do the work. A client can be fully eligible for a non-traded BDC yet still be a poor fit, because eligibility tests wealth while suitability tests circumstances: liquidity needs, income needs, time horizon, tax situation, and concentration. Chapter 6 provides the liquidity framework, and Chapter 7 the documentation standard.