An alternative investment vehicle (AIV) is a companion fund entity the GP uses to make or hold investments when the main partnership is not the right legal container.

How it works

Common triggers: too many ERISA investors in the main fund for a pass-through asset; offshore LPs needing a blocker structure; regulatory limits on investor count. The LPA authorizes the GP to establish AIVs with substantially the same economics—profits and losses allocated as if the main fund invested directly. LPs may automatically participate or opt in/out per side letters.

Cap tables may show “Fund III” and “Fund III-A AIV” as related holders. Fees and carry usually mirror the main fund unless the side letter says otherwise. Dissolution follows the same fund life.

Why it matters

• Founders: You may sign with an AIV instead of the brand-name fund—verify it is authorized under the same LPA family.
• Investors: Tax reporting can split across K-1s from main fund and AIV; accountants need both.
• GPs: AIV planning avoids last-minute scrambles when a sovereign LP joins a sensitive deal.

Common mistake

Assuming an unfamiliar entity name on a term sheet is a different fund with different terms. Ask if it is an AIV of the fund you diligenced.

Related ideas

Blocker corporations, aggregator vehicle, feeder funds, and ERISA VC regulation.