What secondary buyers should know about SPV manager conflicts of interest.

Buying a secondary interest in a special purpose vehicle (SPV) is not simply buying exposure to a private company. You are simultaneously entering a legal relationship with a general partner (GP) — the manager who controls the vehicle, makes voting decisions, handles distributions, and negotiates with the issuer on your behalf. That relationship deserves scrutiny.

Conflicts of interest in SPV structures are not rare, and they are not always disclosed with clarity. Some are structural — baked into every SPV by the nature of how GPs are compensated. Others are situational — arising when the GP manages multiple funds touching the same issuer, or when the GP has a personal relationship with the seller. Knowing the difference helps you ask the right questions.

The three most common structural conflicts

1. Carried interest versus investor return

Carry — typically 10–20% of profits above a hurdle rate — means the GP participates disproportionately in the upside. That incentive is intentional, but it can lead a GP to accept a takeover bid or tender offer that delivers moderate returns quickly, rather than waiting for a larger outcome that would take longer. A GP holding carry in a vehicle that cost $1 M to build has different patience than a limited partner (LP) who put in $500 k of their own capital.

2. Management fees and the incentive to raise larger vehicles

GPs charging an annual management fee — typically 1–2% of committed capital — have a direct economic incentive to raise as much capital as possible into a vehicle, regardless of whether the supply of shares actually justifies that size. A $10 M vehicle generating 1.5% annual fees produces $150 k per year for the manager before any exit. That math can create pressure to fill the vehicle even when the underlying secondary position is thin or priced aggressively.

3. Cross-vehicle conflicts when a GP manages multiple SPVs in the same issuer

A GP running three different SPVs invested in the same private company faces competing duties. If a tender offer covers only a portion of shares, which vehicle gets priority access? If the company's ROFR is exercised, does the GP defend the newest vehicle's investors or the oldest? Operating agreements rarely specify a priority waterfall across vehicles. Investors in the smaller or newer SPV may find themselves subordinated without knowing it.

Situational conflicts to watch for in secondary transactions

Secondary SPVs introduce an additional layer of potential conflict that primary SPVs do not face: the GP often has a pre-existing relationship with the seller. If the GP has sourced shares from the same seller multiple times, or if the seller is a repeat referral partner, the GP may be more motivated to close the deal than to negotiate hard on price. Buyers should ask directly whether the GP has a sourcing arrangement, referral fee, or ongoing commercial relationship with the seller.

A related situational conflict arises when the GP is also an investor in the same round as the seller — meaning the GP has an interest in seeing the secondary priced at a level that validates, rather than challenges, their own mark. This is less common but not unheard of in tightly networked private markets.

What the operating agreement should — and usually does not — say

The limited partnership agreement or LLC operating agreement governing an SPV is the controlling document for conflict disclosure and resolution. In practice, most SPV operating agreements contain broad exculpation clauses — provisions that relieve the GP of liability unless they engage in gross negligence or willful misconduct. That is a high bar for an LP to clear in litigation.

Well-drafted agreements will include a conflicts-of-interest section that lists categories of conflict the GP expects to encounter and how they will be handled. Look specifically for language on: (a) related-party transactions, (b) side-by-side investing by the GP's principals, (c) allocation of investment opportunities across multiple vehicles, and (d) the GP's right to receive compensation from the issuer or seller in connection with the investment. If any of these sections are absent or vague, treat that as a negotiating signal.

• Ask whether the GP or any affiliate has received or will receive compensation from the seller in connection with this transaction.
• Request a list of all other SPVs or funds managed by the GP that hold interests in the same issuer.
• Confirm whether the GP has any advisory, board observer, or information-rights relationship with the company that could create duties that compete with LP interests.
• Check whether the exculpation clause in the operating agreement covers ordinary negligence — if it does, your recourse in most disputes is effectively limited to egregious misconduct.

How to evaluate GP alignment before you commit

The most straightforward signal of alignment is GP co-investment. A manager putting meaningful personal capital into the same vehicle at the same economic terms as LPs has skin in the game. Ask what percentage of the vehicle the GP is investing alongside limited partners, and confirm whether that co-investment carries the same fee and carry structure as LP capital (it should, or the co-investment is largely cosmetic).

Governance rights matter too. Some SPV structures give LPs the right to remove the GP under specific conditions — persistent breach of fiduciary duty, insolvency of the GP entity, or a supermajority vote. Others do not. If the operating agreement contains no GP removal mechanism, you are relying entirely on the manager's integrity for the full life of the vehicle, which can be seven to ten years in a secondary SPV.

Transparency about fees is a baseline test. A GP unwilling to clearly state the management fee, carry percentage, hurdle rate, preferred return (if any), and any transaction fees charged to the vehicle at closing is signaling something about how they intend to manage the relationship going forward.

Practical steps before signing

1. Read the conflicts-of-interest section of the operating agreement in full, not just the executive summary.
2. Ask the GP in writing whether any affiliate compensation is being paid by the seller — require a written response.
3. Run a basic search on the GP entity and its principals to confirm there are no regulatory actions or civil suits related to prior fund management.
4. Confirm the carry and fee structure in a term sheet before you receive the full operating agreement, so you are not anchored by a document that took lawyers weeks to draft.
5. If the GP manages other vehicles in the same issuer, ask for a written allocation policy explaining how conflicts between those vehicles will be resolved.

Secondary markets for private company shares are less regulated than public markets, and the GP of an SPV has meaningful discretion over outcomes that matter to you — when to sell, whether to vote with or against management, and how to handle distributions. Taking thirty minutes to understand where the GP's interests diverge from yours is one of the higher-return uses of pre-closing diligence time.

At Limen Markets, every SPV offered through our platform uses templated operating agreements with standardized conflict disclosure sections. Browse current SPV listings and review the governing documents before indicating interest at /marketplace.