When it comes to family office investing, a special purpose vehicle, or more commonly referred to as an SPV, should not be overlooked. In fact, it might be exactly the tool necessary to meet a family office needs. An SPV investment can provide the support and flexibility that your family office might be in need of. And whether your family is new to family office investing, or is simply looking to start a new chapter for one reason or another, there are definitely reasons worth considering a special purpose vehicle.
From a high level, a special purpose vehicle is a legal entity that lives within a parent company, and is managed as its own separate organization. Essentially, it is a structured vehicle for investing in private assets. While it is common that SPVs are established with the intention of isolating financial risk from the parent company, there are other reasons that a family business or entity might find this to be an attractive route for investing.
For example, family businesses are unique, and their investment strategy should be unique and tailored to them as well. As a partner of a family business, or perhaps a decision-maker when it comes to strategizing and prioritizing family finances, you understand the importance of a family office investment strategy that can be tailored to your needs, and the needs of the larger family enterprise. Through a special purpose vehicle, you achieve precisely that.
Special purpose vehicles create an environment that is favorable to family office investors because it provides them with the flexibility that they require. For example, whether looking to transfer or securitize assets, raise capital for an upcoming project, or isolate the risk of a new venture, a special purpose vehicle provides these additional protections to a family office. Simply put, family office investments through special purpose vehicles put the family in control, and keep them in control.
Special purpose vehicles allow freedom within family office investing, more than just flexibility. For instance, the family members who establish the SPV investment have the ability to invite additional investors to be involved, if they choose. Family members also have the option to keep the investor pool minimal as well, being selective about who they want involved.
On the other hand, perhaps the family office investment strategy involves a percentage of risk through new products or developments. If the larger family company does not want to subject itself to such risk, creating a special purpose vehicle for such a case can protect the larger family assets, while providing a sort of “test-run” scenario for the company.
Since the special purpose vehicle is isolated from the parent company, a family office investment strategy can test the waters and additional avenues of investing, which keeps the larger company finances secure. This can be appealing, especially for family companies looking to stay ahead of the curve, or keep up with the evolving business and technology cultures while not having to shift the larger business model.
If, for example, the family office investment is going to eventually be passed down to a younger generation, then special purpose vehicles might be a risk-averted approach to testing new waters and laying roadblocks for future strategies.
Special purpose vehicles also create an environment of privacy for your family office investment. This is crucial if a family wants to keep its business strategy off of the larger company’s books. Whether because of risk, or creativity, or simply privacy for the sake of privacy, a parent company does not have to disclose information pertaining to financials or investment strategies of a special purpose vehicle.
For many family office investment strategies, privacy is a big deal, and since it can be so easily attainable through a special purpose vehicle, there is no reason not to inquire further and see if such an investment is right for your family office, and your family needs.
If you are looking to tailor your family office investment strategy to better suit your needs, goals, and the overall family business, then it is worth looking into a special purpose vehicle, and understanding how it can better benefit your situation. To learn more about how Assure can help you ensure the success of your next family office investing approach, click here and begin your SPV today!