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American Direct Marketing Services Blog

Heavy Hitters - Million Dollar Portfolio Investors

by Scott Casson | Feb 12, 2015

                          Heavy Hitters - Million Dollar Portfolio Investors

In the business world, namely when procuring investor lists and investor leads, there is always buzz around the term “Accredited Investors”—and while there should be, we must pose the question, “What’s better than an Accredited Investor?”

Should you need a reminder, here’s the Securities and Exchange Commission (SEC) definition of an Accredited Investor 1

                In the context of a natural person, an Accredited Investor is anyone who has:

              ● earned income that exceeded $200,000 (or $300,000 together with a spouse)
                   in each of the prior two years, and reasonably expects the same for the current
                   year, OR

              ● has a net worth over $1 million, either alone or together with a spouse
                   excluding the value of the person
s primary residence

With that refresher, again, let’s see if we can find an answer to that question…what’s…

Better than Accredited Investors

For nearly 40 years, the most requested investor prospects from our Oil & Gas and Private Equity clientele have been Accredited Investors.  And with the recent changes to Regulation D Rule 506(c) offerings via The JOBS Act, the demand for Accredited Investors has skyrocketed.

If you’ve been an avid follower of our Blog you’ll note that we’ve written extensively about the importance of targeting Accredited Investors in the financial marketplace and how American Direct Marketing Services specializes in finding them for our clients.

However, lately there have been additional requests from our clients for investors with million dollar investment portfolios that are “highly liquid”…and for good reason. 

Investors who have $1,000,000+ liquidity in their investment portfolios are arguably the most sought after investor prospects in the marketplace.

Why?  Because: 1) they already qualify as an Accredited Investor.  And 2) these investors participate in a variety of projects such as (but not limited to): private placement offerings, independent oil & gas exploration projects, real estate offerings, angel investor networks, crowdfunding deals and Regulation D Rule 506(c) offerings via the JOBS Act.  And 3) they are highly liquid.

Accessibility to the some of the nation’s wealthiest investor prospects is originally why we at American Direct Marketing Services created our “Million Dollar Portfolios” file. 

So who are these Million Dollar Portfolio Investors?

The Million Dollar Portfolios file, a subset of our Accredited Investor database, specifically targets high net-worth investors with $1,000,000 or more of investable assets in their investment portfolios.

Individuals with million dollar investment portfolios fall into the category colloquially known as “High-Net-Worth Individuals.”  They have US$1 million or more in investable assets which would exclude the value of personal assets and property like: primary residence, collectibles, consumables and consumer durables (such as cars). 2

Simply put, investors in our Million Dollar Portfolios file are by definition Accredited Investors, however they also have a larger amount of liquid investment capital on hand.  

And liquidity is the major differentiation between an Accredited Investor per se and a Million Dollar Portfolio Investor prospect.

Net Worth - vs - Liquid Assets

So what is liquidity?  In the investment world, market liquidity is defined as:

              "a market's ability to facilitate an asset being sold quickly without having to
              reduce its price very much (or even at all). Equivalently, an asset's market liquidity
              (or simply "an asset's liquidity") is the asset's ability to sell quickly without having to
              reduce its price very much."
3

In other words, in order for an investor’s asset to have market liquidity, the asset itself has to be liquid.  Liquid assets are assets that can be sold and converted into cash quickly.

For those who regularly utilize Accredited Investors lists and Accredited Investor leads to raise funds for Private Equity, Oil & Gas projects, crowdfunding deals or Regulation D Rule 506(c) offerings, an investor’s available liquidity is the most sought after investor attribute.

However, Accredited Investors who also have the distinction of possessing a liquid investment portfolio of $1,000,000+ alleviate long delays in accessing and deploying available capital or funds to the marketplace.   

Liquidity is King

Think of it this way—investors who have most or all of their net worth tied up in real estate might take longer to convert their asset(s) into cash before re-deploying those funds elsewhere.

If you’ve ever sold a house, especially in a slow market, it could take up to 90 days or even half a year in order to close.  As a result, an investor’s assets in this case are considered “illiquid.”

Conversely, an investor whose total net-worth solely consists of gold, stocks and bonds has a “liquid” portfolio.  These assets can be quickly accessed, sold, converted into cash and then re-deployed with relative ease. 

To beat a dead horse… liquid buyers who can put up an all cash offer on a house not only streamline but speed up the buying process.  They can omit particular contingencies that could delay, stall or even kill the deal.

In certain cases some sellers will actually take lower bids on their house for an all cash offer specifically out of convenience and certainty!  

A Cloudy Market Clears Up

So how many Accredited Investors and High Net-Worth Individuals with Million Dollar Portfolios live in the US?

Trying to calculate the exact population of Accredited Investors in the US is a little fuzzy­­. The range has been reported to fall between 8.5 and 9.0 million… that’s 3.7% of the adult population (over age 18).

Now, here’s the real focus of this conversation.

How many High Net-Worth Individuals ($1 million or more in investable assets) are there in the US and for that matter, in the world?

Fortunately, there are some high profile studies and research reports that specifically address this market.

According to Capgemini’s World Wealth Report 2013 there are 12 million High Net-Worth Individuals worldwide and 3.436 million are located in the US. 4   In fact, the US leads the world in the largest population of High Net-Worth Individuals.

As for potential investment capital figures, North America continues to hold the greatest share of High Net-Worth Investors’ investable wealth, with US$12.7 trillion as of 2012 5—that’s quite a bit of money that can fund a lot of projects.


*Note: These figures are from 2012 so the current population may prove larger than what is reported. In fact, Capgemini projects a 6.5% annualized growth in these populations up to 2015.

The Top 1%

Given a current US population of 316.1 million, High Net-Worth Individuals roughly make up 1.09% of the total... that’s a small slice of life.  Assuming a conservative distribution of US$10 trillion across the fortunate 3.436 million, we are looking at an average of US$2,910,360.80 of investable assets per High Net-Worth Individual.


a Includes structured products, hedge funds, derivatives, foreign currency, commodities, private equity
b Excludes Primary Residence

Note: Chart numbers may not add up to 100% due to rounding
Source: Capgemini, RBC Wealth Management, and Scorpio Partnership Global HNW Insights Survey 2013

If you want to dig a bit deeper in to their liquid assets, on average 13.5% of High Net-Worth Individuals portfolios is allocated to real estate and an additional 9.3% is allocated to Alternative Investments. That leaves ~77.2% to equities, fixed income, cash and deposits…or about US$2,246,798.50 of liquid assets.  That’s the money available for new investment opportunities.

One could argue those numbers but you can’t argue with the logic behind the increased demand for these heavy hitters—they exhibit all of the pros of an Accredited Investor with deeper pockets and ease of access to investment capital…what’s not to like?

References

1) http://www.investor.gov/news-alerts/investor-bulletins/investor-bulletin-accredited-investors#.VNAA1p3F-Dh

2) http://www.capgemini.com/resource-file-access/resource/pdf/wwr_2013_1.pdf

3) http://en.wikipedia.org/wiki/Market_liquidity

4) http://www.capgemini.com/resource-file-access/resource/pdf/wwr_2013_1.pdf

5) http://www.capgemini.com/resource-file-access/resource/pdf/wwr_2013_1.pdf

      All ADMS lists are guaranteed to be of the highest quality in the industry. Lists are updated quarterly, NCOA'd twice a year and certified to be 93% accurate.