As global private markets recover and deal activity strengthens, the use of SPVs is growing again. In a market of increased regulation, greater stakeholder oversight, and demands for more data-led reporting, how can fund managers optimize their business administration and compliance needs?
Fund managers have continued to outsource the management of special purpose vehicles (SPVs) to specialists in order to benefit from greater efficiencies, continuity, increased transparency, and enhanced risk management. Why do we know this? Because we asked them.
In early 2024, we canvassed the views of 400 senior private markets professionals in Europe, North America, and Asia Pacific on a range of industry subjects, including the use of SPVs. The results of this research to inform our proprietary report SPV Outlook 2024: Charting the Course for Growth in Private Markets.
Our respondents in North America said they faced several challenges when forming and administering an SPV, including increased regulations, a lack of local knowledge or local resources, complying with economic substance rules, and dealing with multiple stakeholders in various states and jurisdictions.
These matters have resulted in an increased outsourcing to fund and corporate services providers who can manage sophisticated SPV portfolios on the fund and asset managers’ behalf.
More than a third (35%) of respondents in our study said the use of SPVs has become more efficient and effective due to the bespoke outsourced corporate solutions available to expedite formation and annual maintenance processes.
What are the main drivers for fund managers to outsource the administration and compliance of their SPVs? At CSC, we see eight catalysts:
1. Specialized expertise
- Fund and corporate service providers have deep expertise in navigating complex regulatory environments. We ensure that SPVs comply with legal and regulatory requirements, including reporting and governance standards.
- These firms are skilled in handling the administrative, operations, and compliance tasks associated with maintaining SPVs. This includes formation, qualification, acting as registered agent, annual report filings and business licenses, providing an address, acting as director and/or officer, setting up and maintaining corporate records, managing board meetings, performing bookkeeping, periodical management accounts, drafting annual financial statements, coordinating audits, cash management, and payroll, and ensuring compliance with all obligations.
2. Operational efficiency
- Outsourcing SPV management can be more cost-effective than managing functions in-house. Fund and corporate service providers typically offer economies of scale and specialized services that can reduce overall costs and provide continuity in keeping all data, documents and compliance up-to-date and accessible via technology.
- Service providers have established processes and systems in place for managing the corporate governance of SPVs efficiently by handling corporate secretarial matters and financial reporting under one roof.
3. Focus on core activities
- By outsourcing SPV management, fund managers can focus on their core activities, such as investment strategy, portfolio management, and investors relations.
- Outsourcing allows fund managers to allocate internal resources more effectively towards strategic initiatives and high-value activities.
4. Risk management
- Corporate service providers are experienced in managing the risks associated with SPVs, including legal, financial, regulatory and tax risks. This reduces the risk of non-compliance and fines or penalties for the fund manager.
- By robust internal controls and audit mechanisms, service providers ensure the proper management and oversight of SPVs.
5. Scalability and flexibility
- As asset managers make investments to scale their operations via SPVs, service providers can handle increased complexity and volume without the need for significant internal resources, processes, and infrastructure changes.
- The range of corporate services provided that are tailored to the specific needs of the fund manager offer flexibility for them to efficiently close deal investments and set up investment structures while adapting to ever-changing regulatory environments.
6. Geographic and jurisdictional expertise
- As most fund managers operate in multiple jurisdictions, a global partner is crucial to offer global expertise with local knowledge to maintain SPVs across different regions and ensure compliance with local laws and regulations.
- Detailed knowledge of local legal, financial, and regulatory requirements, tax aspects and standard market practices is the backbone of enhanced service delivery.
7. Data and technology management
- Fund and corporate service providers use advanced technology platforms for managing SPVs, including legal entity and financial systems, compliance tools, and reporting software that enhance accuracy, efficiency, and transparency.
- Providers invest in robust data security measures to protect sensitive information and ensure the confidentiality and integrity of SPV-related data and documents.
8. Administrative burden reduction
- Outsourcing helps manage administrative and governance tasks such as handling the bookkeeping, legally documenting and administrating transactions, handling periodical management reports, and maintaining the corporate files and administration.
- Providers handle the documentation and record-keeping requirements for legal entities, ensuring that all necessary documents are accurate, up-to-date, and accessible.
These benefits are multiplied when fund managers choose to work with a single one-stop shop that can offer all corporate legal entity related services under one roof.
With a single trusted partner, fund managers can achieve centralization and efficiency across all administrative and compliance requirements for setting up and managing an SPV, saving time and optimizing local resources.
How CSC can help
CSC acts as a one-stop shop, handling the incorporation of legal entities and keeping them in good legal standing. By providing a business address and mail forwarding, directors and/or officers, corporate secretarial, accounting and reporting, cash management, and/or payroll services, we’ve got you! CSC can also help with fund solutions consisting of bespoke outsourcing, fund administration, and investor reporting.
We operate in more than 140 jurisdictions, which allows our global fund managers to work with a single provider instead of using multiple providers covering diverse jurisdictions.
Outsourcing SPV management to CSC allows fund managers to benefit from global reach and specialized expertise, operational efficiency, continuity, and risk mitigation and enables fund managers to focus on their core investment activities and strategic goals.
Interested in finding out more? Download and read our new report—SPV Global Outlook 2024: Charting the Course for Growth in Private Markets.
