Reference · Deal types & structures
SPV (special purpose vehicle)
A legal entity created to hold one specific investment. Secondary buyers often purchase into an SPV that holds the shares rather than taking direct title.
Worked example
A worked example of an SPV's all-in cost stack (illustrative figures):
- 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.
- 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.
- 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.
- 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.
Where this trips people up
Buyers regularly believe they own the underlying shares when they own an interest in a vehicle that owns them. The difference shows up in fees, in information rights, in who votes, and in how and when proceeds arrive at an exit. Layered SPVs — a vehicle holding an interest in another vehicle — compound each of those effects.
Frequently asked
What should I check before investing through an SPV?
The total fee stack including any carried interest, who the manager is and what discretion they hold, whether the SPV holds shares directly or through another vehicle, and what information you are entitled to receive while you hold it.
Does the company know about SPV holders?
It knows the SPV is on the register; it may have no relationship with the underlying investors at all. That is often precisely why the structure is used.
See the full glossary entry, or browseevery term.