What is Qualified Purchaser?
A qualified purchaser (QP) is an individual or institution with at least $5 million in investments. Funds with only QP investors can accept up to 499 investors under the 3(c)(7) exemption — a higher limit than the 100-investor 3(c)(1) exemption.
The Investment Company Act of 1940 requires private funds to rely on exemptions to avoid registering as investment companies. The 3(c)(7) exemption allows funds to have up to 499 investors, but all must be "qualified purchasers" — generally, individuals with $5M+ in investments and institutions with $25M+ in investments.
Most institutional LPs (pension funds, endowments, family offices) qualify as QPs. Many larger private equity and venture funds rely on 3(c)(7) to accommodate their LP base.
Also known as: QP