Accredited Investors Can Make Impactful Choices
By virtue of their net worth and financial sophistication, investors accredited by the Securities and Exchange Commission (SEC) have access to an entire class of investment opportunities that the average investor does not. These investment opportunities range from hedge funds to venture capital and private equity. However, investing in too many of these may overexpose the investor to risk and low liquidity. Today we’ll take a look at some impactful investment opportunities that accredited investors can consider to compliment and diversify their current investment holdings.
Liquidity Shortage: Shorter-term Investment Notes
Accredited investors seeking to maintain a degree of liquidity should look beyond the allure of investment strategies that require a long lockup period. Complementary investments that are characteristically matched for liquidity and risk diversification are shorter-term investment notes. At LENDonate, our unique platform helps investors discover mission driven nonprofit organizations seeking a loan to bridge the gap between a fundraising event or expected grant award. Lenders can browse investment notes by categories including social cause, loan term, interest rate, and risk rating. Lenders can make a loan offer with custom interest rate, a donation, or combination of loan and donation. Lenders receive monthly repayments that can be reinvested into new notes or withdrawn for spending or other investments. For accredited investors looking to complement their investments with shorter-term notes, turning to nonprofit organizations can provide a more liquid alternative that makes a significant impact on the world.
Impact Seeking: Social and Environmental Investment
Liquidity is not the only element that accredited investors seek. Socially Responsible Investing (SRI) has seen dramatic increase in popularity with accredited investors in recent years. This form of investment allows investors the opportunity to fund organizations whose missions are closely aligned with their personal values. The definition of SRI is dynamic as social priorities are constantly evolving. In the 90s, such investments focused on exclusion, e.g. tobacco/alcohol free funds. Recent years have seen a shift to a focus of inclusion, e.g. investing in women-led or minorities-led companies, groups that have less access to capital. Investors passionate about the environment have also seen more investment choices in green bonds that fuel projects such as renewable energy, clean water, and environmental restoration. Environmental, Social, and Governance (ESG) criteria have been refined to help investors evaluate companies based on environmental factors like carbon footprint, social concerns including community impact, and governance concerns such as financial transparency. While more SRI investments have been made accessible to non-accredited investors, accredited investors can and should continue to pave the way and be pioneers in exploring new areas in SRI that are still exclusively available to them.
Tax Awareness: Investing with Philanthropic Vehicles
Successful and profitable investments lead to the dreaded question of tax liabilities. When considering an investment strategy, it is important to consider the after-tax return. To help their clients, wealth advisors often have a number of tax strategies ready to deploy, e.g. placing high potential investments in tax-advantaged retirement accounts. Accredited investors with philanthropic goals may be recommended to establish private foundations or donor advised funds (DAF). While the contributions (grants) help reduce tax liabilities during the years they are made, unique investment opportunities once inside these philanthropic vehicles are sometimes overlooked even though they can benefit the investor for years to come. For example, LENDonate lenders can invest from their DAF to give a loan to nonprofit organizations, with an option to convert it to a grant disbursement in the future. This can be used as an invaluable tax-planning tool, giving the lender/donor flexibility and timing control in grant making decisions.
Investing with philanthropic vehicles can also yield phenomenal results, as illustrated by the early investors of Beyond Meat. On the day of the IPO, investments from the DAF saw 17x return on investment. This investment helped propel Beyond Meat to be an industry leader and also multiplied the charitable fund such that more nonprofit organizations can profit from this success.
Conclusion
As an accredited investor, there is no shortage of opportunities to put your money to work. Considering a nonprofit organization, or SRI investment can have multiplying effects on many levels that benefit both the investor and investee. While accredited investors generally have higher tolerance and appetite for risk, there are a variety of investments to choose from. LENDonate offers various loans that satisfy different levels of risk/return for accredited investors. Head over to LENDonate to browse a wide variety of nonprofit organizations that need financial support to continue fulfilling their critical missions.
