Annual SPV formation has increased 116% over the last five years, demonstrating explosive growth as fund managers leverage special purpose vehicles for co-investments, deal-by-deal structures, and asset segregation. With outstanding asset-backed securities exceeding $13 trillion globally and 89% of GPs expecting continued SPV deal volume growth in 2025, structuring these vehicles requires both strategic vision and operational precision.
The SPV Revolution in Private Markets
Special purpose vehicles—standalone legal entities created for specific transactions or assets—have evolved from niche structuring tools to mainstream investment vehicles. The SPV services market, valued at $13.88 billion in 2025, is expected to reach $26.67 billion by 2035, reflecting their growing importance in modern fund management.
This growth reflects fundamental shifts in how limited partners allocate capital and how fund managers structure opportunities. Co-investment rights have become table stakes in fundraising negotiations, with LPs demanding direct exposure to specific deals alongside blind pool commitments. SPVs provide the vehicle for delivering these co-investment rights efficiently.
Why SPV Formation Has Accelerated
Multiple trends converge to drive SPV adoption. Limited partners reserve 15-30% of allocations specifically for co-investment opportunities, viewing direct deals as chances to increase exposure to specific companies or sectors without paying additional management fees. Global co-investment capital hit a record $33.2 billion in 2024, up substantially from prior years.
For general partners, co-investment SPVs strengthen LP relationships, demonstrate portfolio company conviction, and generate additional capital for larger deals without raising fund size commitments. At the height of the venture market in 2021, 41% of SPVs with more than $10 million in assets charged fees, rising to 67% by 2023—indicating SPVs have shifted from LP accommodation to revenue opportunity.
Beyond co-investments, managers increasingly use SPVs to pursue opportunities outside core fund mandates. A hedge fund focused on public equities might use side pocket SPVs to hold private equity, real estate, derivatives, or cryptocurrency investments—accessing opportunities while maintaining main fund liquidity and strategy discipline.
SPV Structure Variations and Use Cases
Special purpose vehicles take multiple forms depending on investment objectives, regulatory requirements, and LP preferences. Understanding these variations ensures fund managers select optimal structures for specific situations.
Co-Investment SPVs
Co-investment SPVs allow fund managers to offer participation rights to key LPs or bring in new strategic investors for specific deals, giving them direct exposure to companies they find particularly attractive. These structures typically feature reduced or eliminated management fees and carried interest, making economics favorable for participating LPs.
The governance structure of co-investment SPVs varies significantly. Some operate as true co-investments where participating LPs have approval rights and receive detailed diligence materials. Others function more like managed vehicles where the GP maintains full decision authority and participating LPs receive portfolio company exposure without governance participation.
For GPs, co-investment SPVs create several operational considerations. Documentation must clearly specify fee structures, governance rights, transfer restrictions, and exit processes. Participating LPs may have different holding period preferences than the main fund, creating complexity around exit timing and secondary transfer rights.
Deal-by-Deal SPVs for Emerging Managers
First-time fund managers increasingly use deal-by-deal SPVs as alternatives to raising traditional blind pool funds. Each SPV represents a single investment, allowing GPs to demonstrate investment capability and build track records before institutional investors commit to multi-year blind pool structures.
This approach appeals to LPs who want specific asset exposure without committing capital to unspecified future investments. However, deal-by-deal structures create operational complexity—each SPV requires separate documentation, administration, reporting, and eventual dissolution. Managers operating multiple deal SPVs simultaneously face administrative burdens that approach or exceed traditional fund management.
Acquisition and Asset-Backed SPVs
SPVs frequently serve as acquisition vehicles that hold specific assets or businesses. These structures isolate assets legally and financially from other holdings, protecting against cross-contamination of liabilities and enabling asset-specific financing.
Real estate fund managers routinely establish property-level SPVs that hold individual buildings or portfolios. This structure allows property-specific mortgages, prevents issues at one property from affecting others, and facilitates eventual disposition of individual assets without disturbing fund structure.
Similarly, private equity funds may use SPVs to hold specific portfolio companies, particularly for leveraged acquisitions where acquisition debt sits at the SPV level. This structure ring-fences leverage obligations and provides flexibility for eventual exits through SPV equity sales rather than underlying asset transfers.
Regulatory Considerations and Compliance
SPV structuring decisions must account for regulatory requirements that vary by jurisdiction, investor type, and asset class. Improper structure selection creates compliance burdens, tax inefficiencies, or investor access restrictions.
U.S. Investment Company Act Considerations
SPVs holding securities must carefully navigate Investment Company Act requirements. Structures primarily investing in securities risk classification as investment companies requiring registration or qualifying for exemptions under Section 3(c)(1) or 3(c)(7).
The 3(c)(1) exemption limits beneficial ownership to 100 persons, while 3(c)(7) permits unlimited qualified purchasers. For co-investment SPVs with numerous participating LPs, these limitations affect who can invest and how ownership interests are structured.
European Regulatory Framework
European SPVs must navigate AIFMD requirements, national corporate law variations, and substance requirements that determine beneficial tax treatment. The EU Securitisation Regulation, which became effective January 1, 2019, introduced comprehensive rules for simple, transparent, and standardized (STS) securitizations that impact how certain SPV structures qualify for favorable treatment.
Cross-border SPVs operating across multiple European jurisdictions face complexity from varying national implementations of EU directives. Fund managers must assess whether centralized administration from single jurisdictions provides sufficient substance or whether local presence is required in each operating country.
Tax Structure Optimization
Tax efficiency represents a primary SPV structuring objective. Properly designed structures minimize withholding taxes on distributions, avoid entity-level taxation, and preserve favorable tax treatment for underlying investors.
Common SPV jurisdictions include Delaware (U.S.), Cayman Islands, Luxembourg, and Ireland—each offering specific advantages for different investor bases and asset types. Jurisdiction selection depends on investor tax residency, asset locations, and financing structures.
However, substance requirements have tightened globally. SPVs must demonstrate legitimate business purposes beyond tax optimization, maintain adequate local presence, and ensure decision-making occurs within the jurisdiction of organization. Pure shell entities face increasing scrutiny and potential recharacterization.
Operational Excellence in SPV Management
While SPV formation has become faster and more standardized, effective ongoing management requires systematic processes that scale across multiple vehicles.
Standardized Documentation and Shelf Companies
A trend toward standardizing SPV documentation has emerged, including pre-established "utility" SPVs or "shelf companies" that allow faster, more cost-effective setup for new deals. Rather than forming new legal entities for each transaction, managers maintain dormant SPVs that activate when deals materialize.
This approach reduces formation timelines from weeks to days and lowers legal costs through template documentation. However, shelf companies require ongoing maintenance costs and compliance obligations even when dormant—trade-offs managers must evaluate based on expected deal velocity.
Centralized Administration Platforms
Managing multiple SPVs simultaneously creates administrative complexity that manual processes handle poorly. Centralized administration platforms track investor commitments, capital calls, distributions, and reporting across dozens or hundreds of SPVs from unified systems.
These platforms automate routine tasks—generating capital call notices, processing investor transfers, calculating carried interest allocations, and producing investor statements. Automation becomes essential as SPV counts grow beyond 5-10 vehicles where spreadsheet management remains feasible.
AI-Powered Risk Management and Fraud Detection
SPV providers have integrated AI into platforms to enhance risk management, fraud detection, and operational efficiency. Machine learning algorithms monitor transaction patterns, identify anomalous investor behavior, and flag potential compliance issues automatically.
This AI layer becomes particularly valuable for SPVs accepting subscriptions from numerous smaller investors. Automated KYC/AML screening, sanctions list checking, and beneficial ownership verification process hundreds of investors faster and more accurately than manual review.
Co-Investment Program Design
Successful co-investment programs balance LP demand for direct exposure against GP operational capacity and strategic objectives.
Eligibility and Allocation Frameworks
Most co-investment programs establish clear eligibility criteria and allocation methodologies. Typical frameworks prioritize larger fund LPs, strategic investors, or those providing additional value beyond capital. Allocation may be pro-rata to fund commitments or discretionary based on GP relationships and strategic fit.
Transparent allocation policies prevent LP disputes and relationship damage. When GPs reject co-investment requests or allocate disproportionately, clear pre-established rules provide justification and maintain trust.
Fee Structures and Economics
Co-investment fee structures vary widely. Some GPs offer co-investments fee-free as LP accommodation and relationship strengthening. Others charge reduced management fees (often 0.5-1% versus 2% for main funds) and carried interest (typically 10% versus 20%).
The fee structure decision depends on whether GPs view co-investments primarily as revenue opportunities or LP relationship tools. However, as co-investment volume has grown and operational costs have become apparent, more GPs charge at least nominal fees to offset administration expenses.
Operational Processes and Timelines
Co-investment SPV timelines must align with transaction closing schedules. GPs typically provide LPs 5-15 days to commit—sufficient for LP investment committee review but compressed compared to main fund fundraising processes.
Efficient co-investment processes require standardized materials—investment memos, financial models, due diligence summaries—prepared systematically for every opportunity rather than creating materials reactively when LPs express interest. This proactive approach prevents delays and demonstrates professional program management.
Future Trends and Strategic Considerations
SPV usage will continue expanding as structural flexibility and LP preference alignment remain paramount in competitive fundraising environments.
Technology-Enabled Democratization
Technology platforms increasingly enable SPV formation and management for smaller investment opportunities previously uneconomical to structure. Automated formation, digital subscription processing, and blockchain-based ownership tracking reduce costs and timelines substantially.
This democratization allows emerging managers to offer sophisticated structures without institutional infrastructure. However, it also increases regulatory scrutiny as SPVs become accessible to less sophisticated investors requiring enhanced protections.
Integration with Tokenization and Digital Assets
SPVs represent logical structures for tokenized securities and digital asset investments. Blockchain-based ownership records provide transparency, enable fractional interests, and facilitate secondary trading—all natural fits for SPV structures designed for specific asset exposure.
As tokenization adoption grows, SPVs may evolve into digital-first structures with smart contract governance, automated distribution processing, and real-time NAV calculations. This technological enhancement could dramatically reduce administration costs while improving investor experience.
Key Takeaways
- • Annual SPV formation increased 116% over five years, with the SPV services market valued at $13.88 billion in 2025 and projected to reach $26.67 billion by 2035 as 89% of GPs expect continued growth.
- • Global co-investment capital hit $33.2 billion in 2024, with LPs reserving 15-30% of allocations specifically for co-investment opportunities that provide direct deal exposure without additional management fees.
- • At the venture market peak in 2021, 41% of SPVs over $10M charged fees; by 2023 this rose to 67%—indicating SPVs shifted from LP accommodation to revenue opportunity as operational costs became apparent.
- • Standardized documentation and pre-established "shelf companies" reduce SPV formation timelines from weeks to days and lower legal costs through template agreements, essential for managers executing multiple deals quarterly.
- • SPV providers integrate AI for enhanced risk management, fraud detection, and automated KYC/AML screening—processing hundreds of investors faster and more accurately than manual review while ensuring compliance across jurisdictions.
- • European SPVs must navigate AIFMD requirements, EU Securitisation Regulation effective January 2019, and tightening substance requirements that demand legitimate business purposes beyond tax optimization.
Streamline your co-investment program with automated SPV formation, investor onboarding, and ongoing administration. Polibit's platform handles multiple SPV structures simultaneously—standardized documentation, digital subscriptions, automated capital calls, and investor reporting—enabling you to deliver the co-investment rights LPs demand without proportional administrative burden. Explore Fundraising Features or Schedule a Demo to see how technology scales SPV operations efficiently.
Sources
• Carta (2025). Special Purpose Vehicle (SPV): The Strategic Playbook - Annual SPV formation increased 116% over the last five years
• Precedence Research (2025). Special Purpose Vehicle Services Market Size - Market valued at $13.88 billion in 2025, expected to reach $26.67 billion by 2035
• VC Lab (2025). Special Purpose Vehicles in Venture Capital - 89% of GPs expect SPV deal volume growth in 2025; fees rose from 41% to 67%
• CSC Global (2025). Guide to Special Purpose Vehicles - Co-investment SPVs allow strategic investors direct exposure to specific deals
• IQ-EQ (2025). The Evolving Role of SPVs - Standardized documentation and shelf companies enable faster, more cost-effective setup