Special purpose vehicles (SPVs) are a prominent and widely used option to leverage projects in the financial market. FlexFunds explains why companies set up SPVs and how they are structured:
SPVs are established as independent entities by companies of all sizes, including those backed by venture capital, to carry out specific financing projects and facilitate their administration. These vehicles are used to execute securitization strategies, allowing multiple asset classes, both liquid and illiquid, to be converted into listed securities by creating an autonomous pool of assets.
FlexFunds‘ securitization program handles large-scale agreements, allowing asset managers to securitize small or large asset volumes. FlexFunds’ SPVs can enhance the distribution capacity of an investment strategy, whether managing $1 million or $200 million.
What is a special purpose vehicle (SPV)?
An SPV is an entity created by another company, known as the sponsor, to accomplish a specific purpose by assigning it a series of goods or assets. Its activity is clearly defined and limited: to execute and exploit a specific project. This asset and risk separation is achieved through contractual and/or corporate formulas.
Generally, an SPV is identified as a business investment vehicle or vehicle company. An investment vehicle is a tool that allows capital to be raised more cost-efficiently.
FlexFunds, a leading company in the design and launch of investment vehicles, works with renowned international providers to offer customized solutions. They allow asset managers to issue ETPs through an SPV established in Ireland, fully tailored to their needs.
Structure and benefits of SPVs
Special purpose vehicles are structured as subsidiaries of the sponsoring firm and can be established in different jurisdictions, considering aspects such as tax payments. The independence of SPVs grants them legal and asset autonomy, keeping their balances separate from those of the sponsoring company.
According to the Cerulli Edge-U.S. Managed Accounts study, 71% of asset managers prioritize expanding product distribution and creating new investment vehicles. SPVs can be an effective alternative to achieve these goals due to the following benefits:
- Market segmentation and customization: They allow the creation of investment vehicles tailored to different market segments, attracting investors with different risk profiles and preferences.
- Transparency and trust: They offer a high level of transparency, facilitating the understanding of associated risks and benefits, and generating trust among investors.
- Operational efficiency and cost reduction: They simplify the operational structure of an investment strategy, reducing administrative and operational costs.
- Flexibility and adaptability: They allow the investment strategy to be adapted to market conditions, including restructuring the SPV for new assets or modifications without affecting other operations of the parent company.
- Access to new markets and asset types: They facilitate access to markets and assets that would otherwise be difficult to reach, such as investments in emerging markets, illiquid assets, or infrastructure projects.
- Tax efficiency: They can be structured to optimize tax implications for investors, taking advantage of specific tax benefits in different jurisdictions.
- Improved liquidity: They provide or increase the liquidity of certain assets, allowing investors to buy and sell shares in the SPV instead of negotiating the sale of the underlying asset.
SPVs are versatile and powerful tools for enhancing the distribution of investment strategies, resulting in more effective capital raising and the creation of more robust and diversified strategies.
FlexFunds‘ securitization program structures investment vehicles that can enhance the distribution of investment strategies in international capital markets in less than half the time and cost of any other alternative in the market.
You can contact FlexFunds experts at info@flexfunds.com.
Disclaimer:
The purpose of content of the above article, blog, or post is only informational, and it is not intended to provide any sort of investment advice, as an offer of solicitation to buy, sell, or hold, or as recommendation, endorsement of any security, investment, fund and / or company. The content and information provided in the above article, blog, or post does not constitute financial, trading, or investment advice of any type. Neither FlexFunds ETP nor FlexFunds Ltd. is a U.S. registered broker-dealer, or an investment adviser registered with the U.S. Securities and Exchange Commission. Our entities do not raise capital for clients or the Issuers. We do not solicit any specific products, nor offer investment advice or make investment recommendations, nor do we offer tax, legal, financial advice or otherwise. Perform your own due diligence and consult a financial advisor prior to making any investment decision.
