SPV Carry
Definition
SPV carry is the sponsor's performance participation in a special purpose vehicle, often calculated as a percentage of profits after returning investor capital and sometimes after a preferred return. It is common in single-company pre-IPO SPVs, private credit SPVs, real estate syndications, and other deal-by-deal vehicles.
Why it matters
Carry changes the investor's net upside. A buyer may think they are getting exposure to a private company at a certain share price, but the SPV's fees, expenses, and carry determine the actual net economics. Carry also affects sponsor incentives, especially when the sponsor controls information, voting, exits, and transfer processes.
Common misconceptions
- •SPV carry is not the same as a management fee.
- •Carry can apply even if the investor does not own direct company shares.
- •A low upfront fee can still pair with meaningful back-end carry.
Technical details
Common structures
Carry may be 10-20% of profits after return of capital, sometimes with a preferred return or hurdle. Some vehicles include both administration fees and carry.
Deal-by-deal carry is usually calculated at the SPV level, not across an investor's broader portfolio. There may be no offset for losses in other SPVs.
Waterfall effects
A simple waterfall returns capital to investors, then allocates remaining profits between investors and sponsor according to the carry split.
Expenses can reduce distributions before carry is calculated, depending on the operating agreement. Tax allocations may differ from cash timing.
Diligence questions
Is carry calculated before or after expenses, taxes, and preferred return?
Does the sponsor receive carry on realized cash only or mark-to-market gains?
Who controls exit timing, voting, information rights, and secondary transfers?