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Special Purpose Vehicle (SPV)

Related terms: investment vehicle, risk-isolation entity, co-investment structure, project-specific entity, securitisation vehicle

What is a Special Purpose Vehicle (SPV)?

A Special Purpose Vehicle (SPV) is a legally distinct entity created to isolate financial risks associated with specific investments or projects. Families and investors use SPVs to pool resources, protect core assets, and facilitate joint ventures. These entities are particularly popular for high-risk investments, such as private equity, real estate, or co-investments, offering operational and financial flexibility.

Different Types of Special Purpose Vehicles (SPVs)

SPVs can be structured to serve various purposes depending on the investment strategy or operational need:

1. Co-investment SPVs: Enable multiple investors or families to pool capital for a single transaction or project.
2. Project-specific SPVs: Created to fund and manage individual ventures, such as real estate developments or infrastructure projects.
3. Securitisation SPVs: Used to hold and manage securitised assets, such as mortgage-backed securities, for efficient risk management.
4. Risk-isolation SPVs: Designed to shield parent entities or families from liabilities associated with high-risk investments.

These structures provide strategic advantages in terms of liability management, governance, and investment control.