Investor Considerations

The Direct Private Investments Show
Investor Considerations

[00:03:00] – Investor suitability and risk tolerance 
[00:06:00] – Typical investment size in private placements 
[00:09:30] – Additional considerations for accredited investors 
[00:10:30] – Age and investment objectives 
[00:11:00] – Tax status considerations
Carofin, a leading institution in direct private investments, sheds light on

personal factors which should influence investors’ decisions about
investing directly in private companies. In a recent interview, Matt Brown
spoke with experts Garrick Ruiz and Nash Roberts, who shared their
insights on what investors should consider when evaluating private
investment opportunities.

Garrick Ruiz, responsible for private investor sales and syndication, walks
prospective investors through the nuances of each investment offering,
providing them with accurate information to make informed decisions.
Nash Roberts, VP of Sales and Syndication, focuses on broadening the
network of individual accredited investors and family offices interested in
direct private investments.

Understanding Investor Suitability

There are many factors that play a role in determining whether an
investment is suitable. For instance, before an investor decides to move
forward, Nash emphasizes how important it is to understand an investor’s
personal investment considerations and risk tolerance. He suggests
placing smaller amounts, especially for first-time direct private investors, to
help become acquainted with how they work and to place less money at
risk until they are comfortable with the risks involved.

Quote: “Invest less than you want to as a starting place, even if it’s a hot
new deal. Because, as we all know, there’s a lot of hype in the private
capital markets. We want to make sure that you’re comfortable making an
investment and you understand the risks that are inherent to direct private
investment.” – Nash Roberts

Factors Affecting Investment Size

According to Garrick, considerations such as an investor’s needs, risk
tolerance, investment experience, and existing portfolio play a significant
role in determining both the size of investment they might make, but also
the percentage that private investments comprise within their overall
portfolio. While there are exceptions, investors typically allocate between
10% and 20% of their overall portfolio to direct private investments.

Cautioning Overly Enthusiastic Investors

Garrick often advises investors to be cautious, especially if they are
considering a disproportionately large allocation to a single investment
opportunity. The goals are to create diversity, dampen the impact of any
one badly performing private placement, and to counterbalance public
market volatility.

Quote: “The more diverse any particular portfolio is, the smoother those
investment returns will be over time, if any particular given investment
goes through a rough patch … or amendments are required.” – Garrick Ruiz

Investor Considerations

Nash highlights the importance of considering an investor’s age,
investment objectives, and time horizon when advising on suitable
opportunities. For instance, retirees should be cautious when investing in
venture-stage businesses, as these investments are likely to take longer to
produce positive results (if at all), and their risk profile is higher than with
later-stage company investments. To read more related material, see Why
Invest in Alternative Investments: Here are 3 Reasons here.

Tax Implications

Garrick emphasizes that, while tax status plays a role in investment
considerations, it’s crucial to consult with tax professionals or CPAs for
specific advice.


Carofin’s experts recommend investors carefully consider whether private
investments are suitable in respect to their risk profile, liquidity needs, time
horizon and age, portfolio diversification, and more. If they do decide to
move forward, do so cautiously and in increments that will not affect their
lifestyle if one or more do not perform as hoped.

Watch the full episode above and, if you need help choosing direct private investments, Carofin will light the path here.





In the interest of accessibility, here are some terms that any investor should be familiary with.