Special Purpose Entity (SPE)

Special Purpose Entity (SPE) ,sometimes refered to as SPV, refers to specially created pooled funds used as a vehicle to invest in particular assets . AVI has a special pooled fund where investors automatically become shareholders of the fund and their shareholding is a function of their investment into the fund. The SPE tends to have a tenure and the AVI SPE tenure is a minimum of one year before any dividends can be realised. The major benefits is the spread in risk and rewards as more funds are commited into different equities and into diversified portfolio. The performance and benefits of an SPE also lies in its spread and critical mass effect , economies of scale and ability to spread to wider portfolio mix than an individually managed portfolio. An SPE can be highly leveraged once it gains critical mass. A classic example of leveraging an SPE is through focused acquisition of targeted companies with good potential but lacks intellectual capital. For example an SPE US$ 2.5m can identify some undervalued and poorly managed but high potential companies and buy 5% shareholding which can make the SPE a significant entity investor and get proxies from institutional investors and effect business turn around. An individual can improve his/her shareholding through reinvesting his dividends earnings into the SPE. In the longrun such SPE are great assets to raise capital to buy significant stakes in profitable companies