Understand what the SPV owns
An SPV is a separate legal entity formed for a defined purpose, often to hold one investment. Investors generally own an interest in the SPV rather than owning the portfolio company or property directly.
Review the chain of ownership, the security being purchased, voting or information rights, and restrictions on transfer. The legal structure organizes participation; it does not guarantee liquidity or distributions.
Read the economics beyond the headline
Identify management fees, carried interest, administrative expenses, organizational costs, reserves, and how proceeds are distributed. Ask whether the manager or sponsor is investing alongside participants and how conflicts are handled.
Model outcomes after all fees and at more than one exit value. Private securities can remain illiquid for years, and a planned IPO, acquisition, refinance, or secondary sale may never occur.
Treat documents and diligence as essential
Review the operating agreement, subscription documents, offering materials, risk factors, financial information, valuation basis, and tax reporting expectations. Confirm who controls material decisions and how investors receive updates.
Accredited-investor status is an eligibility standard, not a measure of suitability. The investment still needs to fit your concentration, liquidity, time horizon, and ability to absorb a complete loss.
- What must happen for the thesis to work?
- What could permanently impair the investment?
- Who controls the exit, and what reporting will investors receive?