>These people almost always earn more than $200,000 a year and so qualify as "accredited investors" under the SEC's definition

Actually not, because accredited investors must have cleared $200k for the two previous calendar years and most people who co-invest under the knowledgeable employees exemption are PE associates who have been on the job for less than two years.

> most people who co-invest under the knowledgeable employees exemption are PE associates who have been on the job for less than two years

Source? (Private equity associates are entry-level number crunchers. Their fraction of carry is a rounding error, if positive.)

I don't have a source, but most capital deployed by private investment firms (ie, the firms where the exemption is relevant) is deployed by traditional PE shops. And in my direct experience, the employees at traditional PE shops who invest via the exemption are almost always associates. And also in my direct experience, the vast majority of PE associates are on the job for two years, three max.

Private equity associates very rarely receive carry, which is why they co-invest instead.

*edited for clarity

> Private equity associates very rarely don't get carry, which is why they co-invest instead

The vast majority of partner co-investment vehicles I've come across contain partners' capital. A rounding error may be from associates, who are usually counted against the limited number of unaccredited investors such funds can, with great legal liability, be marketed to.