Setting Up an SPV - Experiences / Do's + Dont's ?

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Sublime8700
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Joined: Tue Dec 01, 2009 3:27 pm

Setting Up an SPV - Experiences / Do's + Dont's ?

Post by Sublime8700 » Sun Jul 16, 2017 6:58 pm

A small group (between 5-8) individuals are considering setting up an SPV for the purposes of making an investment in a fund. We are doing so because it would allow us to reach the minimum contribution for the fund collectively, whereas individually we would not want to make that size investment.

Please ignore, for a moment, the question of whether the investment itself is wise. It happens to be in a hedge-fund but I am only including that for the purposes of this discussion.

Does anyone have any experience doing this? The general structure would be that the rules of the SPV would be very restrictive to anyone involved in order to minimize head-ache -- e.g no additional contributions or withdraws for the LPs in the SPV (even where the Hedge Fund would allow it) besides on an annual basis on a specified day - with notice - or something similar.

I would be interested in any general thoughts or specific resources keeping in mind the goal is to keep the structure and upkeep extremely simple.

bloom2708
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Re: Setting Up an SPV - Experiences / Do's + Dont's ?

Post by bloom2708 » Mon Jul 17, 2017 4:20 pm

The only ships that do not sail....partner ships.

Sounds like a bad idea. Hedge Fund. How does a partner get out? Do the other partners buy them out (more cash) or do you sell (bad timing?).

:confused
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

Pepe.Silvia
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Re: Setting Up an SPV - Experiences / Do's + Dont's ?

Post by Pepe.Silvia » Mon Jul 17, 2017 4:28 pm

Depending on the type of fund you may run into an issue with investing through an entity that was "formed for the purpose" of investing in that fund. Check the subscription agreement of the fund. This type of arrangement may be specifically prohibited.

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celia
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Re: Setting Up an SPV - Experiences / Do's + Dont's ?

Post by celia » Mon Jul 17, 2017 4:38 pm

Do you mean a Special Purpose Vehicle (Entity)? https://en.wikipedia.org/wiki/Special-purpose_entity

If you are in Europe or India, I don't know if we will have someone knowledgeable with something this specific.

My only comment is to start with the exit plan. How will it dissolve? What if one or more people want/need to cash out? What if someone dies and the money needs to go to their estate? How will disagreements be resolved?

The answers shouldn't be posted here but written into the documentation forming the group. In the worst case, if you all died while together, what would your heirs need to do? Hint: It needs to be in writing with each person getting a signed copy. Your heirs may need it in the future.

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