The Anatomy of an SPV

By: Bobby Dormanesh

The industry is seeing a growing trend in Special Purpose Vehicles (SPVs). SPVs are similar to traditional funds – investment vehicles used to pool money from investors – but a SPV makes an investment in a single portfolio company. Taking it a step further, the investment opportunity is already identified prior to when capital is called. Here’s why investors and fund managers look to SPVs.

Investor perspective

• Access – In an environment of growing mega-funds and investment minimums, SPVs provide a simplified alternative for investors to penetrate the market and/or deploy additional capital. Since the SPV is making a concentrated investment, it doesn’t require as much capital as a traditional fund, resulting in lower investment minimums for investors. Additionally, SPVs typically offer more favorable terms to investors.
• Transparency – In a typical fund, investors are investing into a fund manager’s strategy over the course of multiple years and don’t have input on specific portfolio company investments. Conversely, when investing in a SPV, investors don’t have to participate in investments that they are not interested in because they have full transparency on the what the investment will be. All capital is called upfront and invested directly into a portfolio company.

Fund manager perspective

• Proof of concept – SPVs are a great tool for emerging managers who looking to establish a track record, grow overall AUM, and develop relationships with limited partners.
• Timing – Sometimes a great investment opportunity comes along that requires speed. Rather than waiting one to two years to raise a fund, utilizing a SPV provides a quick alternative to deploying capital. Furthermore, if a fund is already fully deployed, SPVs serve as a solution to make follow-on investments.

How we can help

CLA is here to help you step into this growing trend of using SPVs to make investments. Our fund services team is ready to assist your back office with fund administration so that you can find your next target. We also have teams of industry specialist ready to help you meet your compliance needs. Our digital team can create dashboards summarizing relevant KPIs across the portfolio and dashboards that provide detailed look into each of your investments.