Direct investing gains ground as RIAs question stacked SPV access

Registered investment advisors are increasingly weighing direct stakes in private companies against the multi-layer special purpose vehicles that have long provided access to marquee deals, as wealth creation shifts earlier into a company's life cycle and away from the public markets. With companies staying private for longer, the equity gains that once showed up in a brokerage account only after an IPO now accrue years earlier – pushing advisors to decide which side of that gap they want their clients on, a question central to a broader industry shift toward private-market access for RIAs.

Why some advisors are stepping back from stacked SPVs

Jason Tosh, founder and principal at Arena Private Wealth, said every layer placed between a client and a company costs something – usually one of the three things that matter most: economics, information, and control. Going direct, he said, means his firm sits on the cap table, gets the data room, gets management on the phone, and negotiates terms itself.

"Companies are staying private longer, so the growth that used to show up in a brokerage account after the IPO now happens years before it. If you want your clients on the right side of that gap, you have to earn a seat at the table," Tosh said.

He added that quality of access starts before a vehicle even exists. "Everyone is fighting for scraps of the same deals, and the allocation you get is a direct function of your network: who called you, how early, and whether the company wants you on the cap table or a third party just wants your check. From there the layers question is simple: an SPV is just a wrapper, but a second pooling layer is where information degrades, and it can get expensive and opaque fast. Our clients sit one layer from the company, through the group that led the round," he said.

Matt Malone, head of investment management at Opto Investments, offered a more measured view, arguing direct investing and fund-of-funds structures aren't rivals so much as tools suited to different jobs – direct where an advisor has real conviction and can do real diligence, funds where manager selection and diversification are the harder problem to solve in-house.

"Advisors should ask whether the client – or themselves, working on their behalf – has a genuine edge or access on a specific deal? If yes, direct makes sense. If you're trying to build a diversified sleeve of private exposure across strategies you don't have deep underwriting capability in, fund of funds, or a hybrid, makes sense. Most sophisticated programs I see end up blending both: funds for the core, diversified sleeve, and directs layered in where the advisor has genuine access or conviction. Treating it as an either/or is where people get it wrong," Malone said.

Where direct investing fits, and where it doesn't

Malone said quality of access is not simply a matter of securing an allocation – it depends on whether an advisor has a direct line to the company or lead investor, or is three or four SPVs removed from anyone actually in the room. "I ask three things before I'll get comfortable with a layered structure: Who is named on the cap table? What information rights and governance rights survive the stacking? And who's on the hook if the deal needs more capital or hits trouble – does our capital have a real seat, or are we the last to know? If I can't get clean answers to those, I don't care how marquee the logo is," he said.

Tom Burt, managing partner and senior portfolio manager at 1280 Financial Partners, said direct investing offers RIAs and their clients access to opportunities that tend to be more local, nimble, and innovative than fund vehicles, though the trade-off is greater risk and complexity. He pointed to the expansion of private market exchanges as a force lowering the barrier to quality of access, a shift also visible in the wave of institutional capital entering the RIA industry more broadly this year.

"With the expansion of private market exchanges the barrier to 'quality of access' is getting lower and lower. With the incredible size of the current crop of marquee deals, gaining exposure is no longer a key differentiator amongst RIAs. With hundreds of billions of dollars being sold via IPOs and pre-IPOs, finding shares to buy is easier than ever," Burt said.

The client relationship dividend

Beyond returns, several advisors framed direct access as a growth and retention tool. Tosh said passive allocators "order off a menu," while active participants "build the dish" – leading rounds, shaping board-level decisions, and bringing clients directly into a company's story. "Everybody allocates to funds, and so do we, but nobody hires us for that. They hire us for our best ideas. Once a client understands the company and why we're in it, the relationship stops being about a line item and becomes a partnership in something they're part of," he said.

Malone made a similar point about referability, noting that a client can tell a business partner "I'm in this specific company" in a way they can't about being one of a thousand LPs in a diversified fund of funds – a dynamic also weighed in the debate over direct investing versus co-investing among other private markets specialists. He cautioned, though, that the excitement of a direct deal cuts both ways: an underperforming, illiquid position can outweigh a winning one, which is why advisors should be cautious "particularly at a time when everything seems to be going in one direction."

Burt agreed that direct access can deepen client dialogue and win new business. "For prospects, it also provides an opportunity to demonstrate the depth of our investment capabilities and how we can build portfolios around an individual client's circumstances, objectives and interests," he said.