NAV finance market estimated at $44bn in 2023, rising to $145bn in 2030

  • HSBC Asset Management (HSBC AM), which has alternatives assets under management (AUM) of $71.1bn, has launched its first net-asset-value (NAV) financing strategy, receiving an anchor commitment from its parent bank

  • The HSBC NAV Financing Partnership Fund will provide senior loans secured by private equity portfolios, with the majority of credits expected to be investment grade rated

  • HSBC AM is currently raising two direct lending funds in addition to the new NAV financing strategy, according to Preqin Pro

  • ‘NAV Finance is becoming a core part of the global private equity fund ecosystem as, in our view, fund managers and investors alike aim to continue building value in the context of longer asset hold periods,’ said Borja Azpilicueta, Head of Capital Solutions at HSBC AM


September 26, 2024 (Preqin News) – HSBC AM is the latest fund manager to enter the growing NAV space. Oaktree, which acquired a majority stake in NAV specialist 17Capital in 2022, estimates the size of the market at approximately $44bn in 2023, rising to $70bn-plus in 2025 and $145bn in 2030.

GPs are increasingly using NAV-based facilities to generate liquidity, fund follow-on investments, or for distributions in lieu of exits. While the majority of NAV finance is used for investments in portfolio companies, the use of loans to return capital to investors has caused concerns.

Earlier this year the Institutional Limited Partners Association (ILPA) issued guidelines for the use of NAV finance. These included making proceeds recallable when used to return capital to investors, and also that GPs seek limited partner advisory committee (LPAC) approval if they intend to use NAV financing to generate a distribution or support the portfolio. ILPA said the ‘understanding around these products is relatively nascent, and limited transparency around their use inhibits LPs’ understanding of the impacts of these facilities, including costs and any risks.’