Fund Finance: The next generation

With near-universal acceptance of subscription credit facilities, what are asset managers using to efficiently deploy capital, enhance yield, and preserve flexibility for their funds and LPs?
Umbrella credit facilities. These agreements allow an asset manager to aggregate multiple subscription-backed credit lines, thus benefiting from multiple investment vehicles under one set of documents in a single transaction. With the added efficiency, asset managers and LPs can save an incredible amount of time and money vs. using multiple stand-alone subscription credit facilities. The result enhances fund returns and simplifies figures the operation of those funds. We estimate that cost savings are often in seven figures if done right. When designed and installed with experienced and specialized advice, fund sponsors will ultimately have more time to focus on their core investment management business.

NAV credit facilities for private funds have been popular lately. How large is that market, and will it continue to grow?
According to Preqin, funds have a combined $9tn in unrealized value, a massive market that is growing exponentially. As such, we predict NAV financing will be ubiquitous among private equity funds within the next five years. Fueling this trend will be the growing demand for NAV credit that is increasingly being met by more, and more specialized, NAV lenders. Recent NAV lending M&A activity, NAV lending-specific fund launches, and the emergence of NAV lending as a sub-strategy for LP private credit allocations have all substantiated this market’s potential and continued growth. 

Private equity is struggling with talent acquisition, training, and retention. Many sources have noted the trend of increased outsourcing and the resulting efficiencies. Do you see that trend continuing?
Absolutely. In fact, that is one of the reasons FFP launched several years ago. It can be expensive, time-consuming, and inefficient to attract or develop talent in sophisticated, esoteric spaces like fund finance. Naturally, we’re a bit self-interested here, but outsourcing makes a lot of sense in the fund finance space.

The entire asset management ecosystem benefits immensely from leveraging a knowledgeable and experienced adviser’s market expertise and industry connections. One asset manager, even the largest, will never execute on the number of transactions at the scale that a niche advisor in the space will. Additionally, working with a product expert covering the industry ‘an inch wide, but a mile deep’ affords you access to strategies, tactics, and terms at the cutting edge of the market.

About
Anastasia Kaup is a Managing Director and Partner at Fund Finance Partners. Anastasia advises established and emerging asset managers on various debt financing solutions to achieve their objectives. Her clients include some of the largest asset management firms in the world, across private equity, private credit, real estate, and other asset classes and fund strategies. Anastasia also Co-Chairs the Diversity in Fund Finance initiative for the Fund Finance Association, the industry association for fund finance.
Fund Finance Partners arranges a wide range of financing solutions for alternative asset management firms and funds, across all asset classes, including subscription and NAV-based lines of credit, management companies, general partner credit facilities, and a variety of other solutions.