- The SPV treadmill occurs when managers repeatedly create and administer a separate legal vehicle for every individual investment
- A Customizable Fund centralizes multiple investments within one fund framework while investors retain the ability to choose which deals to back
- Investors typically receive one consolidated K1 regardless of how many individual deals they participate in inside the fund
- This structure does not eliminate securities law obligations, managers still need Rule 506(b) or 506(c) exemptions and qualified legal counsel
- Avestor combines Customizable Fund infrastructure with administration and investor management, per Avestor's About page
For emerging fund managers and operators who regularly raise capital from accredited investors, the traditional deal-by-deal SPV model can become increasingly difficult to manage. Identify an opportunity, create a new entity, prepare offering documents, onboard investors, manage the investment, distribute proceeds, handle tax reporting, then the next deal arrives and the entire process starts again. This recurring cycle is often referred to as the SPV treadmill. Avestor's Customizable Fund is designed around an alternative model built specifically to break that cycle.
What Is the SPV Treadmill?
A Special Purpose Vehicle is a legal entity created for a specific investment or transaction. SPVs are widely used in private markets because they isolate a particular investment and allow a defined group of investors to participate. For an operator completing one or two transactions, this structure can be practical. The challenge appears when deal volume increases, a manager completing eight, ten, or twenty investments may find themselves maintaining multiple legal entities, separate offering documents, separate investor records, separate accounting, separate bank accounts, and multiple tax reporting processes, all while spending an increasing amount of time managing the infrastructure surrounding each transaction rather than sourcing the next one. That is the SPV treadmill.
Why Deal-by-Deal SPVs Become Difficult to Scale
The fundamental issue isn't that SPVs are inherently inefficient, the problem is repetition. Common challenges include repeated formation work for each new vehicle, a fragmented investor experience where existing investors complete another subscription process for every investment, multiple reporting streams and potential tax complexity across separate entities, and operational overhead from tracking multiple entities, accounts, documents, and distributions. For a manager building a recurring investment business, these inefficiencies can become a significant distraction from sourcing investments and raising capital.
What Is a Customizable Fund?
A Customizable Fund is a fund structure designed to combine the centralized infrastructure of a fund with the investment level choice commonly associated with syndications and SPVs. Instead of creating a new vehicle for every transaction, the manager operates through a central fund, and investors participate in specific investments according to the structure and terms established for the offering. Traditional approach: deal, new SPV, new documents, new investors, new administration. Customizable Fund approach: one fund, multiple investments, investors select eligible opportunities, centralized administration.
How the Customizable Fund Structure Works
The process can be thought of in five stages.
- 1. Establish the FundThe manager establishes the fund and its governing and offering documents with appropriate legal and regulatory support.
- 2. Raise Investor CapitalEligible investors are onboarded into the fund according to the applicable offering exemption and subscription process.
- 3. Identify Investment OpportunitiesThe manager continues sourcing investments across the fund's permitted strategy or asset classes.
- 4. Allow Investors to Select OpportunitiesRather than automatically allocating every investor to every investment, the structure can allow investors to choose eligible opportunities according to the fund's framework.
- 5. Centralize AdministrationInvestor records, reporting, capital activity, documents, and other administrative workflows are managed through the fund's centralized infrastructure, often via a platform like Avestor.
Customizable Fund vs Traditional SPV
| Feature | Customizable Fund | Deal-by-Deal SPV |
|---|---|---|
| Core structure | One fund | Separate vehicle per deal |
| New entity for each deal | Generally not required | Typically required |
| Investor deal selection | Can be supported | Yes |
| Centralized investor management | Yes | Fragmented across vehicles |
| Reporting | Centralized fund infrastructure | Separate by SPV |
| Suitable for recurring deal flow | Yes | Can become operationally intensive |
The important distinction is that a Customizable Fund isn't simply an SPV with more investments. It is a different operating approach intended to centralize the fund infrastructure while maintaining flexibility around individual investment participation.
Why This Structure Matters for Emerging Fund Managers
Emerging managers often sit between two models. They may have outgrown informal or one-off syndication structures but aren't ready to operate like a large institutional fund manager with a substantial internal operations team. A manager might have a growing investor network, multiple investment opportunities, recurring capital needs, and increasing reporting requirements, but still be running operations through spreadsheets, email, separate SPVs, and disconnected service providers. A centralized fund infrastructure can help close that gap.
Customizable Funds for Private Lending and Revolving Loan Books
The structure can be particularly relevant to private lenders, mortgage fund managers, and hard money operators. A traditional deal-by-deal structure works naturally when every transaction is a separate project, but lending businesses often operate differently, a private lender may continuously raise investor capital, originate a loan, receive principal and interest, recycle capital, and originate another loan. This creates a revolving loan book rather than a fixed collection of investments, and a continuously offered fund structure can align more naturally with the operating model of a recurring lending business.
How Avestor Supports the Customizable Fund Model
Avestor provides infrastructure designed for emerging and growing private market managers, combining fund formation support, investor management, compliance support, administration, accounting and tax coordination, and investor facing technology. The platform includes functionality for investor onboarding, KYC and AML workflows, capital calls, distributions, investor reporting, document management, and investor portal access. Avestor describes its Customizable Fund as a framework intended to simplify private offerings while providing investors with flexibility and transparency, particularly relevant for managers who want to build a repeatable capital raising operation rather than treating every investment as an entirely separate fundraising project.
Who Can Benefit From a Customizable Fund?
- Real estate operators. Managers completing multiple acquisitions who want a more centralized investor relationship
- Private lenders. Hard money lenders and mortgage fund managers operating recurring loan portfolios
- Alternative asset managers. Managers investing across specialized strategies that don't fit neatly into traditional fund structures
- Emerging PE and VC managers. Managers building their first or second institutional style investment vehicle
- Co-GP and capital allocators. Operators allocating investor capital across multiple opportunities and looking for more centralized administration
What About Regulation?
A Customizable Fund does not eliminate securities law obligations. Private funds and private offerings must still be structured and operated in accordance with applicable securities laws and the fund's governing documents. Rule 506(b) and Rule 506(c) under Regulation D have different requirements regarding solicitation and investor eligibility, under Rule 506(c), issuers can generally engage in broader solicitation but must take reasonable steps to verify that purchasers are accredited investors. Managers should work with qualified securities counsel when determining the appropriate structure and offering exemption. The SEC provides additional information about private placements and Regulation D on Investor.gov.
The Bigger Shift: From Deals to an Investment Business
The most important advantage of moving away from the SPV treadmill isn't simply reducing paperwork, it's changing how the manager operates. Instead of asking "how do I create the infrastructure for this deal," the manager can begin asking "how do I build an investment platform that can support the next 10, 20, or 50 deals." A scalable infrastructure can create a more consistent experience for investors while giving the manager a centralized operating system for fundraising, investment management, reporting, and administration.
Authoritative Resources
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Frequently Asked Questions
Key Takeaways
- The SPV treadmill occurs when managers repeatedly create and administer separate vehicles for individual investments, and the administrative burden compounds with deal volume.
- A Customizable Fund structure centralizes multiple investments within a single fund framework while investors can potentially retain investment level choice.
- The model can be especially relevant for emerging fund managers, real estate operators, private lenders, and managers with recurring deal flow.
- A Customizable Fund does not remove securities law obligations, managers should work with qualified legal professionals to determine the appropriate structure.
- Avestor combines Customizable Fund infrastructure with investor management, administration, and compliance support, per its About page.