Alternative investments have traditionally been limited to high net worth individuals and institutional investors. However, with the growing use of Special Purpose Vehicles (SPVs), alternative investments are becoming more accessible to a wider range of investors. In this article, we will explore how this ‘SPV ecosystem’ is democratizing alternative investments.
What is an SPV?
An SPV is a legal entity that is created for a specific investment purpose. It pools together funds from multiple investors and invests them in a single asset, or a portfolio of assets. The SPV structure provides investors with protection from liabilities and allows them to invest in assets that they may not have been able to access independently.
Growth of the ‘SPV Ecosystem’
SPVs are a commonly used investment structure, but historically took a long time, and cost a lot of money, to set up. The emergence of online platforms and tools have paved the way for their wider use, creating a new ‘ecosystem’ of SPVs.
This SPV ecosystem offers several benefits to individual investors:
- Access: It is now easier for individual investors to access alternative investments, which were previously only available to institutional investors or wealthy individuals. With the rise of crowdfunding and other online investment platforms, SPVs have become more shareable, accessible and affordable for individual investors.
- Diversification: Individual investors can more easily diversify their portfolios by investing in multiple projects or startups through a single SPV, or multiple SPVs. This reduces the risk of losing all of their investment if one project fails, and provides an opportunity for higher returns if one or more of the investments are successful.
- Participation: Individual investors can participate in investments that they may not have seen before. For example, a startup that is raising money may only need a few hundred thousand dollars to get off the ground: too small for an institutional investor, but perfect for a group of individual investors through an SPV.
Conclusion
Overall, the SPV ecosystem is democratising alternative investments by providing investors with access to a wider range of assets and reducing the minimum investment requirements. The SPV structure also provides investors with adequate protection and a low-cost solution for investing in alternative assets. As the SPV ecosystem continues to grow, we can expect to see more investors taking advantage of this innovative investment structure.
Ready to set up a SPV?
At Auptimate, we make it easy for Angel Investors to design, launch and operate market-leading SPVs online for a fixed, low price. If you’re ready to start your next SPV, hit the “Launch” button at the top of this page. Or get in touch with us at info@auptimate.com and one of our experts will be more than happy to help.
