Warehouse SPV Before Fund Close: Holding Deals Until First Close

A warehouse SPV holds a deal until a committed fund can take it at first close. The vehicle buys (or the GP's affiliate buys) because the round will not wait for the LPA to be signed. The fund later acquires that position on the terms the LPA describes — often "at cost," as that document defines cost. This is mechanics. It is not investment advice, and it is not a conclusion that any given roll-in is or is not a principal transaction.

This is general information, not legal, tax, or investment advice, and not an offer or solicitation.

What a warehouse SPV before fund close is

A warehouse SPV is a special purpose vehicle formed to hold one investment (sometimes a short pipeline of related closings) that the GP intends to move into a fund that does not yet exist or has not yet held a first close. It is an SPV with a sunset: the purpose clause should say the asset is held for contribution, sale, or other transfer to a named or to-be-formed fund, not for a multi-year independent program.

That is different from:

• A deal SPV that is the investment. The SPV is the vehicle LPs stay in through exit. See How to Set Up an SPV.

• A co-investment SPV alongside a fund that already exists. Co-invest sits next to the fund's own check. Warehouse sits before the fund can write that check.

• A secondary SPV that buys an existing interest from a holder. Warehouse is a primary (or founder/employee) close that is parked, not a stripped secondary book.

Emerging managers use a warehouse when a company is closing now and the fund's first close is later. The alternative is miss the allocation, or write a personal check the fund may or may not be able to take out.

Why emerging managers warehouse

A first-time fund is a document, a raise, and a close. Deals do not queue behind that process. The warehouse exists so the GP can sign a purchase agreement as an entity, take the allocation, and keep the cap table clean at the company while the fund launch finishes.

Typical funding sources for the warehouse — commercial patterns, not a recommendation:

• GP balance sheet or principal capital

• Friends-and-family or seed LPs who subscribe into the warehouse SPV knowing the roll-in plan

• A third-party warehousing facility (rare for a first fund; a credit decision, not an SPV form)

Whoever funds the warehouse owns the economics until the fund takes the asset. If the fund never closes, those holders still own a deal SPV. Draft the warehouse operating agreement for that outcome, not only for the success case.

Roll-in at cost is an LPA term

Pitch decks say "we will roll the warehouse into the fund at cost." That sentence is empty until the LPA defines:

• What "cost" is. Purchase price, plus closing costs, plus reasonable holding costs, plus (or minus) any bridge economics. Unrealized mark-up is a different number. If the clause says "cost," it is not "fair value at first close" unless it also says so.

• Who sells and who buys. The warehouse SPV can sell the securities to the fund, or the warehouse LPs can contribute their interests for a fund interest, or the fund can subscribe into the warehouse. Those are different tax and securities steps. Counsel picks among them.

• Timing. At first close, or during a stated post-close window, and what happens if only part of the target fund size comes in.

• Who pays transaction costs of the roll-in.

None of that is a valuation opinion or a suggestion to warehouse a deal. It is the list of items the LPA and the warehouse operating agreement should not leave blank.

If the fund's first close is smaller than the warehouse, the LPA needs a rule: take all of it, take a slice, or leave the rest in the SPV as a continuing co-invest. Do not improvise that split on the closing call.

Principal-transaction issues: take them to counsel

When an adviser, acting as principal for its own account, knowingly sells a security to a client or buys a security from a client, Advisers Act Section 206(3) makes that unlawful unless the adviser discloses in writing, before completion of the transaction, the capacity in which it is acting and obtains the client's consent (15 U.S.C. § 80b-6(3)). The SEC has interpreted "completion" for this section as settlement, and has stated that consent may be obtained prior to execution or after execution but before settlement (SEC, Interpretation of Section 206(3) of the Investment Advisers Act of 1940).

Whether a particular warehouse roll-in is a Section 206(3) principal transaction depends on facts this post will not decide: who beneficially owns the warehouse, whether the adviser is acting as principal, whether the fund is a client, and how consent is obtained. Do not treat this paragraph as a conclusion that your roll-in is, or is not, a principal trade. Send the structure to counsel before first close, not after the assignment agreement is circulating.

Related process points counsel will actually use:

• Written disclosure of capacity and conflicts, and consent, if 206(3) applies — on a transaction-by-transaction basis; the statutory text does not describe a blanket waiver

• Whether GP consent on behalf of the fund is effective consent, or whether LPs or an LPAC must act

• How the PPM and LPA describe warehousing before LPs subscribe, so the later transfer is not a surprise conflict

• Record-keeping of the cost schedule and the transfer documents

Sections 206(1) and 206(2) (fraud and deceit) sit next to 206(3). Compliance with a consent mechanic, if one applies, does not exhaust fiduciary analysis. That, again, is counsel's memo, not a platform blog's holding.

LPAC, disclosure, and emerging-manager funds

Institutional LPAs often send conflicted transactions to the LPAC. A first-time fund may have no LPAC. In that case the LPA still needs a conflict process: specified disclosure, a non-conflicted consent party, or a prohibition on the GP warehousing without pre-clearing the form of roll-in in the LPA itself.

Disclose the warehouse in the PPM and the LPA before first-close LPs subscribe: what is being held, at what cost basis the GP proposes to transfer, who funded the warehouse, and what happens if the fund does not take the position. After-the-fact ratification is a weaker story than a pre-disclosed mechanic.

Emerging managers should also keep the warehouse boring. One deal, documented cost, no recycling, no follow-on program inside the warehouse unless the fund LPA will take those follow-ons too. A warehouse that starts behaving like Fund I without Fund I's investors is a different offering.

Warehouse SPV vs waiting vs co-invest

Formation of the warehouse is ordinary SPV work: Delaware LLC, operating agreement with a warehouse purpose, subscription, bank account, close on the company documents. Allocations publishes a Standard SPV at $9,950 one-time and 0% platform carry. That is a formation-and-admin figure, not a recommendation to warehouse.

A warehouse SPV is a holding pattern with a defined exit into the fund. Put the cost definition in the LPA, put the conflict process in front of counsel, and do not blur it with co-invest or with a secondary vehicle. If those documents are not in agreed form, you do not have a warehouse. You have a deal SPV you have not told Fund I about.