SPV (special purpose vehicle)

Worked example

A worked example of an SPV's all-in cost stack (illustrative figures):

1. An investor commits $250,000 to an SPV that holds a block of a single company's secondary shares. The SPV, not the investor directly, appears on the company's cap table — simpler for the company to approve one entity rather than many individual buyers.
2. The SPV sponsor typically charges a one-time setup/administration fee (commonly around 2-2.5% of committed capital, roughly $5,000-$6,250 here) plus carried interest on profits (commonly 10-20%) once the underlying position is eventually sold.
3. If the underlying shares later sell for $400,000 (a $150,000 gain before fees), a 2.5% upfront fee ($6,250) and 15% carry on the gain (about $21,500) reduce the investor's net proceeds by roughly $27,750 relative to holding the shares directly.
4. The SPV structure trades a real cost — fees and carry stacked on top of the underlying deal — for real convenience: it lets a company approve one cap-table entry instead of dozens of individual small buyers, which is often the only way a secondary sale of this size gets approved at all.