Ten questions to ask before you sign an SPV provider

Choosing an SPV provider is a procurement decision but often made like a pricing decision. By comparing the advertised formation fee, the cheapest credible option usually wins and the real costs surface eighteen months later when a vehicle needs to do something the provider did not anticipate.

These are the questions to consider.

1. Which entity holds the regulatory permission, and what is its reference number?

Not “we work with a regulated partner”. The name of the entity and the number, which you can check on the FCA Register in under a minute. If the provider is an appointed representative, ask who the principal is and what happens to your vehicles if that relationship ends.

2. Which jurisdictions can you form in, and how fast?

Jersey, Delaware, the UK, Luxembourg and Cayman are not interchangeable. Your investor base decides which one you need. Ask for real elapsed time from instruction to a vehicle that can receive money, not the time to incorporate a shell.

3. Who holds the assets?

Formation and custody are different services and are often provided by different firms. Ask who acts as custodian or depositary, under which licence and what the arrangement is if the provider fails.

4. What happens to the verification across vehicles?

If every new vehicle re-onboards the same investors, you are taxing your best relationships. Ask whether an investor verified once can subscribe to the next deal without repeating the process, and where that record lives.

5. What is the all-in cost of a vehicle over its life?

Formation fee, annual administration, per-investor charges, banking, audit where required and the cost of winding up. A low formation fee with per-investor charges across a seven-year life is not cheaper than a flat fee.

6. What does the investor actually see?

Increasingly the subscriber is a wealth adviser or a trust rather than an individual angel. Ask what onboarding looks like for an entity rather than a person, what reporting the end investor receives and whether it is something an adviser could put in front of a client.

7. How does the carry work?

Carry mechanics, hurdles and splits between multiple parties should be handled in the documents and in the administration, not in a spreadsheet you maintain. Ask to see how a two-lead deal with different economics is handled.

8. What happens when someone wants to sell?

Secondary transfers are where thin infrastructure shows. Ask whether interests can be transferred, what the process is, who updates the record of ownership and how long it takes.

9. Can this become a fund?

Most managers who eventually raise a named fund run several vehicles first. Ask whether the track record, investor base and reporting history carry across, or whether raising a fund means starting again with a different provider.

10. What is the exit?

If you leave, who holds the records, how are the vehicles transferred and what does it cost. A provider who has not thought about this is telling you they have not been asked before.

The pattern behind the list

Nine of these ten questions are really one question asked from different angles: how many separate parties stand between you and the thing you need, and which of them holds the accountability. Every additional link adds a handoff, a reconciliation and a place where the answer becomes “that is handled by our partner”.

This is not an argument that integrated is always better. It is an argument that you should know which model you are buying before you sign, because the difference does not show up in the formation fee.

For what it is worth, Floww’s answer to question one is Floww Markets Limited, authorised and regulated by the FCA (FRN 980098), with a Jersey AIFM, a Jersey-regulated depositary and a US FINRA broker-dealer in the same group, forming vehicles in Jersey, the UK and Delaware.

Ask us the other nine.

Floww Markets Limited is authorised and regulated by the Financial Conduct Authority (FRN 980098). This article is general information. It is not legal, tax or investment advice. Capital at risk when investing in private markets.