Cell Shares are equity units or share classes designated to specific segregated portfolios within an SPC, ensuring that proceeds from share issuance and capital flows remain attributable exclusively to that portfolio.
What Are Cell Shares?
Cell Shares (or "portfolio shares") are share classes or equity units that are legally designated to a specific segregated portfolio within an SPC. When investors purchase Cell Shares, the capital raised is attributed exclusively to that portfolio's asset pool and cannot be accessed for obligations of other portfolios or the general SPC. Each portfolio may have multiple share classes (e.g., Class A investor shares, Class B institutional shares) with distinct fee structures, investment terms, or investor requirements, all designated to that specific portfolio.
How Do Cell Shares Work?
At SPC incorporation or portfolio creation, fund managers designate specific share classes to segregated portfolios. When investors subscribe to Cell Shares for a particular portfolio, the subscription proceeds are immediately credited to that portfolio's assets. The fund administrator tracks which share classes belong to which portfolio, ensuring that NAV calculations, performance reporting, and redemptions are attributed correctly. If a portfolio redeems all shares (liquidates), only holders of Cell Shares designated to that portfolio receive redemption proceeds; holders of shares in other portfolios are unaffected.
Why Are Cell Shares Important for Fund Structure?
Cell Shares operationalize the legal segregation principle, they create a clear, auditable link between investor capital and specific portfolios. For allocators, Cell Shares provide certainty that their investment remains exclusively in their chosen portfolio. For managers, Cell Shares enable offering multiple investment mandates with different terms under a single SPC without confusion or cross-contamination of capital flows.
Example: Cell Shares in Practice
An SPC contains two segregated portfolios: Conservative Income SP and Aggressive Growth SP. Conservative Income SP issues Class A Cell Shares (2% management fee, 10% performance fee, 10-year lock-up), attracting pension fund capital. Aggressive Growth SP issues Class B Cell Shares (1.5% management fee, 20% performance fee, monthly liquidity), attracting hedge fund allocators. An investor purchasing Class A Cell Shares' capital is attributed exclusively to Conservative Income SP; an investor purchasing Class B Cell Shares' capital goes exclusively to Aggressive Growth SP. Redemptions, fee calculations, and performance reporting remain completely separate.
When Should You Use Cell Shares?
Cell Shares are essential for:
SPCs offering multiple investment mandates with distinct fee structures
Ensuring clear, auditable attribution of investor capital to specific portfolios
Accommodating diverse investor requirements (different lock-up periods, fee arrangements, share classes)
Simplifying NAV calculation and investor accounting across multiple portfolios
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