What Is Sidecar In Investing?
Sidecar, in the context of investing, refers to a separate investment vehicle or fund that is established alongside a main investment fund or project to provide additional capital, often on a deal-by-deal basis.
Sidecar investments are typically made by a subset of the investors in the main fund or by external investors who have a specific interest in a particular opportunity or asset.
What Is An Example Of A Sidecar Fund?
A private equity fund might create a sidecar fund to pursue a specific investment opportunity that aligns with the interests of a smaller group of its limited partners.
The sidecar fund allows these investors to participate in a single deal without committing to the entire fund. This structure can provide flexibility and customisation in investment strategies.
What Is The Difference Between Sidecar And SPV?
- Sidecar Fund: A sidecar fund is typically a separate investment vehicle established to invest in a specific opportunity or asset alongside a main fund. It often involves a subset of investors from the main fund. Sidecar funds are used for a specific purpose or investment, and their lifespan is relatively shorter.
- SPV (Special Purpose Vehicle): An SPV is a legal entity created for a specific purpose, often to isolate risk or hold specific assets. SPVs can be used in various financial transactions, including securitisation, real estate investments, and structured finance. While SPVs can be a component of sidecar investments, they are not limited to this use. They are separate legal entities used to achieve various financial and legal objectives.
What Is The Difference Between Co-Investment And Parallel Fund?
- Co-Investment: Co-investment refers to the practice of existing limited partners in an investment fund (for example a private equity or venture capital fund) investing additional capital directly alongside the fund in specific deals or opportunities. It allows investors to increase their exposure to specific investments without the fees associated with the main fund.
- Parallel Fund: A parallel fund is a separate but parallel investment fund that runs in tandem with the main fund. It is often established to accommodate different types of investors, such as those with specific tax or regulatory requirements. Investors in the parallel fund typically have similar exposure to the same investments as the main fund, and it allows for more flexibility in accommodating diverse investor needs.