A Structured Investment Vehicle (SIV) is a type of Special Purpose Vehicle (SPV) established specifically for investment and financing activities. Its core function is to earn a spread between the long-term assets it acquires and the short-term liabilities it issues to finance them.

SIVs are typically involved in interest rate arbitrage—purchasing longer-term, higher-yielding financial assets and funding these positions through shorter-term, lower-cost debt instruments. Key features include:

• Investment Activity: SIVs primarily invest in assets such as mortgage-backed securities, auto loans, and credit card receivables. These are funded through instruments like commercial paper and medium-term notes.

• Liquidity Management: Given their reliance on short-term funding markets, SIVs require close liquidity oversight to meet rolling maturities and investor redemptions.

• Credit Structuring: SIVs often incorporate credit enhancement mechanisms—such as over-collateralization or external guarantees—to improve the credit ratings of their issued securities.

• Market Exposure: Their performance and viability are closely tied to interest rate differentials and the availability of short-term funding, making them sensitive to changes in market conditions.

SIVs vs. SPVs

While all SIVs are technically SPVs, not all SPVs are SIVs. SPVs serve a broad array of functions—from asset segregation and securitization to project finance—whereas SIVs are specifically structured for credit-driven investment operations. SIVs are typically more exposed to market and liquidity dynamics given their strategy of maturity transformation.