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NAV Financing: Evolution within Fund Financing

  • Educational Content

Net Asset Value (NAV) Financing refers to a form of lending that takes the NAV of the assets of a fund as collateral (in other words, lending which is secured against the underlying assets in the fund’s portfolio). Although some LPs might believe that NAV Financing is a new asset class which has only emerged recently, it has existed for several years.

Taking the NAV of various types of funds in different asset classes as collateral, banks have been lending to a variety of funds for decades. The recent evolution is that NAV Financing is now starting to move away from the traditional banks and is being replaced by institutional capital via funds. Another evolution is that funds started to provide more flexible solutions (e.g., providing preferred equity vs senior secured loans) which banks traditionally didn’t provide.

This is a similar trend that has been seen within the European Direct Lending market, where banks are also gradually pulling out of the market due to regulatory constraints and are being replaced by Direct Lending funds.

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Jun Narui

Managing Director, Head of Asia

Jun is Head of Asia, in the Business Development team. He has various roles including business development in Asia and leading strategic projects within the firm.

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