In an increasingly dynamic environment for institutional investment, special purpose vehicles (SPVs) have become a key tool in the structuring of sophisticated investments. Their flexibility, tax efficiency, and risk mitigation capabilities make them a widely adopted solution among fund managers and private equity firms.
FlexFunds has developed a model based on the creation of SPVs, or special purpose vehicles, designed to support asset managers looking to package investment strategies in a flexible, scalable way—ready for international distribution.
SPVs are independent legal entities, created by a sponsor or parent company to isolate assets and structure investments with a specific purpose. They function as neutral vehicles that allow strategies to be implemented without affecting the balance sheet or liabilities of other group entities. To set up an SPV, the sponsor transfers the assets through a contract and trust structure, granting the SPV its own separate estate.
SPVs have a wide range of applications, including:
- Public corporations may use SPVs for risk management purposes, such as isolating specific holdings from the parent company’s balance sheet.
- In venture capital (VC) and private equity (PE), emerging fund managers often launch an SPV to build a track record before raising capital for a traditional fund.
- SPVs can also act as “sidecars,” allowing investors to back companies that don’t fit the strategy or investment terms of their main fund.
In the FlexFunds model, SPVs are used to consolidate liquid or illiquid assets and convert them into listed securities that can be distributed through recognized platforms such as Euroclear. The asset manager’s track record is reflected on Bloomberg, SIX Financial, or Morningstar, increasing both visibility and liquidity for the investment strategies.
Key advantages for asset managers
- Limited liability: Investors limit their exposure strictly to the capital they contribute.
- Efficient risk management: Assets and liabilities are segmented, minimizing systemic risk.
- Tax optimization: SPVs can be established in tax-efficient jurisdictions, maximizing net returns.
- Structural flexibility: They can be designed as debt, equity, or hybrid vehicles, depending on investment objectives.
Important considerations when structuring an SPV
- Transparency: It is essential to ensure visibility into the assets and their performance.
- Leverage: Must be managed carefully to avoid excessive risk.
- Operational complexity: Setting up an SPV involves administrative, legal, and regulatory costs.
- Governance and conflicts of interest: A clear separation between sponsor and manager is critical to protect investor interests.
FlexFunds’ securitization program is based on Irish SPVs due to the structural, legal, and tax advantages this jurisdiction offers:
- An on-shore jurisdiction that is a member of both the EU and OECD.
- The only EU jurisdiction fully governed by common law.
- A transparent and efficient tax regime with a broad network of double taxation treaties.
- A special tax regime (under Section 110 of the Taxes Consolidation Act 1997) that allows an Irish SPV compliant with Section 110 to transfer income to investors in the most tax-efficient way possible.
- Flexible listing options, including Vienna’s MTF and Euronext Dublin.
- A highly developed infrastructure of service providers—auditors, legal advisors, corporate service providers, and other professionals—to support and manage SPVs.
While the use of SPVs is not new, FlexFunds has built a modern program designed to simplify the distribution and structuring of complex investment strategies. In a landscape where efficiency, customization, and traceability are essential, this type of structure provides asset managers with a real competitive edge.
“FlexFunds has built a series of efficient and reliable issuance platforms that offer all the benefits of SPVs established in Ireland. This model is becoming increasingly common, with 91% of Irish SPVs set up by international sponsors—70% of which are based in the United Kingdom or the United States,” notes Daragh O’Shea, Partner, Financial Services Department, Mason Hayes & Curran.
To learn more about how to establish an SPV and boost the distribution of your investment strategy, please contact with FlexFunds’ experts at contact@flexfunds.com
