SPV (Special Purpose Vehicle)
An SPV is a separate legal entity created for a specific investment, transaction, or purpose, often to pool capital or isolate risk.
Allocator relevance: Common in venture/co-investments—impacts beneficial ownership, KYC/AML, and decision authority mapping.
Expanded Definition
SPVs are used to aggregate investors into a single vehicle that invests in a company or asset. They can simplify cap tables for startups and enable smaller investors to participate. However, SPVs introduce structural complexity: ownership mapping, fee layers, governance terms, and administrative burden.
For allocator intelligence, SPVs matter because they can hide or aggregate underlying LP identities, making beneficial ownership and contact verification more complex.
How It Works in Practice
An SPV manager forms an entity, raises capital from participants, and makes the investment. Participants hold interests in the SPV, not directly in the underlying company. Terms can vary widely (fees, carry, governance).
Decision Authority and Governance
Governance depends on SPV documentation: who controls voting, how information flows, and how conflicts are handled. Compliance requires clear beneficial ownership and KYC/AML processes.
Common Misconceptions
- SPVs are always standardized and low-cost.
- SPVs eliminate administrative complexity.
- SPVs don’t impact ownership structure mapping.
Key Takeaways
- SPVs add a structural layer with real implications.
- Ownership and compliance mapping are essential.
- Evaluate fee layers and governance carefully.