A qualified client is a type of investor that is exempt from a provision of the Investment Advisers Act of 1940 that prohibits private investment funds from charging performance-based fees. An individual or entity is considered a qualified client if they:
- Have $1,000,000 or more of assets under management with the investment adviser after the investment in the fund;
- Have a net worth of $2,100,000 prior to the investment in the fund (excluding the value of his or her primary residence);
- Is a “qualified purchaser”; or
- Is an officer or director of the fund manager or is an employee who participates in the investment activities of the investment adviser and has been doing so for 12 months.