How to Use SPVs and Tokenization for Private Equity Secondaries

Private equity secondaries have traditionally been a niche, opaque segment of the private markets. But as demand for liquidity in illiquid assets grows, innovative tools like SPVs (Special Purpose Vehicles) and tokenization are transforming how investors gain access to, manage, and trade private equity secondaries. In this post, we explore how combining SPVs and blockchain-based tokenization can unlock new opportunities for sponsors and investors alike.

What Are Private Equity Secondaries?

Private equity secondaries refer to the resale of existing stakes in private equity funds or privately held companies. These transactions can involve:

• LP Secondaries: Where limited partners sell their fund interests to other investors.
• Direct Secondaries: Where shareholders in private companies (e.g., founders or early employees) sell their equity to new buyers.

The secondary market allows early investors to exit before a fund’s maturity or a company's exit event, improving liquidity in an otherwise long-term asset class.

The Role of SPVs in Private Equity Secondaries

An SPV (Special Purpose Vehicle) is a legal entity created to isolate financial risk. In private equity, SPVs are commonly used to:

• Pool capital from multiple investors into a single investment
• Simplify cap table management for the underlying asset
• Enable deal-by-deal syndication
• Facilitate access to a single secondary opportunity for a wider group of investors

SPVs are especially helpful in secondary deals, where fractionalizing ownership of large, illiquid positions can open up access to smaller or more targeted investors.

Introduction to Tokenization in Private Equity

Tokenization is the process of converting ownership rights in an asset into digital tokens on a blockchain. In the context of private equity, this enables:

• Fractional ownership of traditionally illiquid assets
• Automated compliance via smart contracts (e.g., enforcing transfer restrictions, KYC/AML)
• Increased liquidity through secondary trading on regulated digital asset marketplaces
• Real-time cap table management and transparent ownership records

Tokenization turns static investment instruments into dynamic, programmable assets.

Combining SPVs and Tokenization: A Powerful Framework

By tokenizing an SPV, sponsors can offer investors fractional ownership in a private equity secondary position through blockchain-based tokens. Here's how it works:

1. An SPV is formed to purchase a secondary interest (e.g., a PE fund stake).
2. The ownership of the SPV is divided into digital tokens, each representing a proportional claim on the SPV's assets.
3. Investors purchase these tokens, gaining exposure to the underlying secondary asset.
4. Smart contracts manage investor onboarding, compliance, and token transferability.
5. Tokens can be traded on secondary marketplaces, increasing liquidity.

This structure brings the benefits of institutional-grade private equity access to a broader, more agile investor base.

Real-World Applications

Platforms like SPV.co are making this model more accessible and scalable. By offering:

• SPV creation and management: Legal, compliance, and administrative setup
• Token issuance infrastructure: Blockchain-backed token generation
• Investor onboarding tools: Streamlined KYC/AML and accreditation workflows
• Liquidity options: Partnerships with secondary token exchanges

... sponsors and investors can transact more efficiently than ever before.

For example, a growth-stage company employee holding equity may sell shares into an SPV, which is tokenized and offered to accredited investors, enabling both liquidity and broader access.

Benefits for Sponsors and Investors

For Sponsors:

• Raise capital faster by expanding the investor pool
• Lower minimum investment requirements without adding complexity
• Automate investor compliance and reporting
• Offer built-in liquidity options through tokenized structures

For Investors:

• Gain access to exclusive, institutional-quality secondary deals
• Invest smaller amounts via fractionalized tokens
• Trade tokens on compliant platforms for earlier liquidity
• Enjoy improved transparency and control through real-time dashboards

Challenges and Considerations

While the model is promising, it’s not without hurdles:

• Regulatory clarity: Tokenized securities still face scrutiny under U.S. securities laws (Reg D, Reg S, etc.).
• Market maturity: Secondary trading venues for security tokens are still developing.
• Education gap: Many investors and fund managers are new to blockchain technologies.
• Cybersecurity: Token infrastructure must be secure, compliant, and scalable.

Despite these concerns, the momentum is growing — and early adopters are gaining a competitive edge.

Conclusion

The intersection of SPVs and tokenization is redefining how investors participate in private equity secondaries. By combining these two powerful tools, it's now possible to offer flexible, compliant, and liquid access to one of the most historically illiquid asset classes.

At SPV.co, we provide the infrastructure and support to launch, manage, and tokenize SPVs for private equity deals — including secondaries. Whether you're a sponsor looking to syndicate a deal or an investor seeking better access and liquidity, our platform simplifies the process from end to end.

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