Kenneth Orr Explores the Pros and Cons of Investing in Single Stock Special Purpose Vehicles
When it comes to investments, there are no shortcuts to success. Any skilled investor will tell you that the key factors are extensive research, informed decision making, weighing risks, decisive action, an open mind, and a sturdy set of nerves. The best investors are always open to and considering every potential possibility for how they will divvy up their money; it’s not about merely doing what everyone else is doing and following the herd.
Whereas it’s common practice to look into stock exchange traded funds (ETFs) or Index Funds, which mimic the stock market itself in a lower-risk-lower-reward strategy, one unconventional investment strategy that is currently gaining traction is the Single Stock Special Purpose Vehicle, or SPV for short. The SPV represents a course of action with high potential, a contrarian investment thesis that is worth going against the grain. Kenneth Orr, chief investment officer of KORR Acquisitions, has facilitated the usage of SPVs for the last five years with a 44% annual rate of increase and can easily explain the specifics of SPVs as well as their pros and cons, so that you can decide if they are the right investment option for you.
What Is An SPV?
In basic terms, an SPV is a legal entity that is created for the express purpose of investment. Essentially, the SPV is one investment for one group of people, and this is the key difference between it and other investment plans.
The SPV is concentrated, created almost always with a specific objective in mind, as opposed to having a wide range of investment ideas. As one might think, it’s also designed for taking larger risks, with the scenario in question being closer to having all your eggs in one basket; the SPV can be used by professionals to better allocate their risk. By disclosing the exact investment idea to the investors ahead of their investment, the investor can see if indeed they have other similar or investments in the same industry and/or risk profile. Rest assured, as with any other investment, you decide how much you’re going to put into it, and in the case of the SPV, you can expect to get back what you put in and then some, so long as you make intelligent decisions.
One of the most important things to know about an SPV, according to Kenneth Orr, is the notion that it is a much more hands-on experience; investors will get a much clearer picture of where their money is going, as opposed to a general strategy.
What Are the Risks?
First and foremost, the timing of raising money for an SPV may indeed be imperfect. Stocks do move, and a deep value today can be over-priced tomorrow. Since the position is concentrated, the performance of the past SPVs may not be indicative of future investments if they have a much different profile.
When you choose to invest in an SPV, you’re making a much more intentional commitment. Because an SPV is more focused in nature, as well as being more difficult to course correct because investors must reach a consensus, there is a much smaller margin for error here. Whatever you have planned, you’re committed to it for the most part and there’s no turning back. This makes Kenneth Orr’s KORR Acquisitions SPVs very interesting indeed, as KORR’s track record has consistently beaten the markets since their founding in 2014.
The inherent composition, or concentration of the SPV, makes it a less safe option in general, and therefore investors should only invest a portion of their investable capital in each one. In addition, investors, and their investment professionals should appreciate any investment in an SPV as fully concentrated. If you look for diversity, the SPV can help, but only if taken in consideration of the investor’s overall portfolio. If you’re uncomfortable with volatility, which single investment vehicles inherently have, you’re most likely better off choosing an alternative investment strategy.
What Are the Advantages?
Put simply, an SPV is not diversified to the same extent as other investment options; it’s concentrated and designed to stay the course. While this might sound like a disadvantage at first, and it is true that you are very much committed to your course of action when you invest in an SPV, the reality is that you have the potential to make far more than a traditional set of diversified stock holdings. SPVs can be the performance boost you need to reach new heights of success.
Another big advantage that SPVs can provide is the notion of transparency. You can’t get much better than an SPV if you want to see exactly how your money is being spent, and what you see is what you get. As long as you’re willing to take a hands-on approach, you can also experience the benefit of not having a middleman such as fund manager and have direct control over your investment decisions.
Kenneth Orr, chief investment officer of KORR Acquisitions, says that SPVs represent a promising investment alternative with a strong financial potential, greater control for investors, and a tighter focus. They should be considered as an option, and if they are the right fit for you, you can expect to go far.
This article does not necessarily reflect the opinions of the editors or management of EconoTimes.