US thresholds have historically used income or net worth excluding a primary residence, with a higher qualified purchaser test based on investable assets for certain funds. Other jurisdictions use similar wealth-based tests under names such as professional client or sophisticated investor.
The logic is that private offerings carry lighter disclosure, so access is limited to those presumed able to absorb a loss and to fund their own due diligence. The criticism is that wealth is a poor proxy for understanding, and rules in several jurisdictions now add knowledge-based routes to qualification.
For the investor, the label is a gate rather than a protection. Private offerings can be illiquid, valued infrequently and difficult to exit; the eligibility test does not make them suitable. See hedge-fund and private-equity.
Related: hedge-fund, private-equity, limited-partnership, illiquidity-premium, sec, non-traded-reit