Our Thoughts on the 14th Annual Global Fund Finance Symposium

Introduction

From 26-28 February 2025, the Fontainebleau Hotel in Miami Beach was the venue for the 14th Annual Global Fund Finance Symposium, organised by the Fund Finance Association (FFA).

The symposium was a huge success, attracting almost 2500 delegates and more than 180 sponsors from the global fund finance community. The agenda covered a wide range of topics, from current trends and legal developments to industry forecasts and best practices.

The symposium was an excellent opportunity for attendees to learn, network and reconnect with peers and experts in the field. Our global Fund Finance team was delighted to attend and support the symposium as Gold and Wi-Fi sponsors. This year, I was honoured to moderate the fireside chat with the fabulous Ryan Reynolds, and we heard from many other fantastic speakers, including Tom Brady.

Our team has summarised the key takeaways from a selection of the amazing panel discussions we attended.

PANEL: Fund Finance Market Update

• One of the main topics discussed was the impact of ILPA’s guidance on NAV lending. Initially, there were concerns about this guidance, but it is now seen as a logical progression from ILPA’s previous guidance on subscription lines. For some funds, the guidance formalised existing practices with LPs, while for others, it improved reporting discipline and discussions. This should lead to more detailed disclosures in LPAs, with early reports suggesting this is occurring.
• The second theme was the increased competition among lenders, benefiting borrowers. The variety of products has expanded, with options like SMA coverage and borrowing base coverage for previously ineligible investors becoming more available. Competition has led to more bespoke, relationship-based solutions for borrowers. Non-bank lenders in the NAV space have enabled borrowing in areas where traditional banks may not lend, aiding the development of this asset class.
• On securitisation in fund finance, better knowledge of these products is leading to improved structuring, easing ratings analysis during securitisation. As fund finance products grow faster than banks’ balance sheets, there is a need to optimise lending for the best capital treatment. Securitisations in this sector are likely to increase as comfort with these products expands. Familiarity of the product with other asset classes will assist integration into the fund finance market.
• Predictions for 2025 are optimistic, with robust fundraising and bullish behaviour in the market and M&A sector. Pipelines are filling up, especially among larger asset managers who can remain invested longer due to challenges with valuations. Continued comfort with sub-lines and NAVs means borrowers will increasingly use and evolve other market products, such as CFOs and GP-line facilities, and formalise relationships with non-bank lenders. This new class of lenders has emerged rapidly, and their involvement will grow as collaboration among market participants increases.

PANEL: Secondaries Nav Lending

• As highlighted at recent conferences, the definition of NAV lending is continuously evolving. In particular, the secondaries space allows NAV lenders to leverage the diversification of this asset class, pushing the boundaries of what constitutes a “NAV loan”.
• For secondaries funds, the primary use cases for NAV loans are acquisitions and recapitalisations. Additionally, the funds can issue dividends to investors from loan proceeds, a practice more accepted with these funds than with buy-out funds. This is largely because secondaries funds are a step removed from the direct control of the underlying investments which link distributions to direct investment success and timelines for exit.
• The influx of insurance market entrants has coincided with longer loan periods, providing market stability through the use of CFOs and rated note feeders. This has led to a proliferation of solutions and products, increasing market participation and structural variance.
• Hybrid loan structures are also gaining traction in the secondaries market, preferred by some funds looking to establish a NAV facility earlier in the fund lifecycle. While NAV facilities have long been a staple, recent structural changes to funds and products highlight ongoing market innovation.
• The substantial deal flow anticipated in 2024 is expected to grow further in 2025. The secondaries market within private equity has seen significant growth in recent years, suggesting increased competition among suppliers of these facilities. This competitive landscape is likely to spur further innovation in products and collaborative solutions, particularly with private credit lenders and insurance partners entering the space. Consequently, the outlook for secondaries is promising, with a positive future for the use of NAV facilities.

PANEL: Private Credit: Navigating the Golden Age

• Panellists discussed whether Private Credit had reached its golden age. There was general agreement that despite its huge growth, the private credit market is still in its infancy. Asset-based finance will be an important part of the maturity of the market, which will result in a higher quality product. Banks have a different perspective than they did 10 years ago, in that they now see private credit as potential partners – not a competitor taking away their business. There are still new entrants coming in on both the lender and investor sides. With more competition, innovation continues, and there are still opportunities and potentials for further growth.
• The recent partnerships between banks and asset managers, as well as Goldman Sachs’ creation of a capital solutions group, was also discussed. Both banks and asset managers see value in these partnerships, so we can expect to see more of these in the future.
• In terms of longer-term outlook, the view was that the growth for private credit will come as individual investors start to play a bigger role. Direct lending will perform well over the next 10 years, with the expectation that rates will come down. There will also be more consolidation in the market.
• As it relates to the retail market and the blurring of lines between the private and public markets, the panel highlighted that expanding education into the public sphere is important more now than ever. It was pointed out that there is a need to get to a point where the market is available to everyone but with proper regulation and the correct safety nets.
• High net worths are coming into a bigger share of the borrowing base, and there was discussion around how this plays into the underwriting process.
• Regulation was seen as inevitable but positive development, which will help bring more investors into the private credit space and give the required guardrails to these new investors.
• Overall, the biggest opportunity for private credit appears to be the private to public connection and how to develop products around that, opportunities around the non-sponsor space with privately owned businesses and end-of-life fund life solutions.

PANEL: Non-Bank Lender Perspectives in Fund Finance

• Until very recently, NAVs have been the primary focus of non-bank lending – but it was noted that this year has seen the emergence of subscription lines as an investable asset class for non-bank lenders.
• This has not been due to supply-side issues on the bank side, but a desire among GPs to tap into new sources of financing.
• As might be expected, information and disclosure obligations are an important consideration for GPs – particularly when this might result in information going to peers. A combination of getting the right covenant package, and transfer rights, is therefore key.
• The panellists also noted that non-bank lenders have been seeking to complement, not complete with, non-bank lenders.
• On the one hand, the need for customisation has been an important driver for growth of non-bank lenders and a key value add. But banks still have an advantage in terms of operational capability.
• Subscription lines have also historically been a relationship-driven product – and therefore partnering, not competing, has been central to growth in this space.
• Trust was a key theme of the panel, as was the importance of listening to the needs of GPs, understanding bespoke funding needs, and providing a solution which falls outside the traditional bank offering.
• Overall, there was optimism about the growth of non-bank lending and, while there might be bumps in the road, 2025 should see the upward trajectory continue

PANEL: Another Sputnik Moment: The Integral Role of Our Capital Markets in Our Nation and Economic Security

• This panel explored the often not considered, but crucial, corelation between capital markets and US national security and the fact that economic prosperity is inextricably linked to national security.
• The level and extent to which US adversaries are able to avail themselves of access (both legal and illegally) to public and non-public information in order to capture data that is used to undercut the US supply chain is not fully understood by most people.
• It is known that US adversaries have been collecting mountains of data from the US for over 30 years and now, with increasing AI technology, they can start to make better sense of it.
• Both the US Department of Defence (DOD) and the Defense Advanced Research Projects Agency (DARPA) have initiatives to educate capital markets participants on how to keep their information safe and protect technology from going overseas.
• It can be as simple as asking what information is, and is not, appropriate to provide in response to investor requests. Once a piece of information is in the public sphere, it cannot be put back in the bottle.
• We in the capital markets are the “watchmen of freedom”. Over 40% of capital markets activity flows through the US. This industry needs to do what it can, now, to be aware of this threat and mitigate against it to maintain our economic prosperity and way of life.

PANEL: NAV Lending to Buyout Funds

• The NAV lending to Buyout Funds market has grown year on year, increasing by 30% annually since the COVID pandemic. The reason for the growth was driven by managers’ need for liquidity owing to capital markets being forced shut and causing managers to find new forms of financing.
• There have been changes to the structures and security packages over recent years, which has led to flexible and creative structures, including securing particular assets, lending to SPV over one or two assets backed by a fund guarantee, or securing only small portions of the fund, rather than all assets. There are some differences in approach between the US and Europe, but ultimately the objective is to design a structure that does not impede the manager from doing what it needs to do and enables them to create value and protect value for LPs.
• The use of NAV facilities has been the cause of some negative publicity in the press, but the Panellists’ view was that a very minimal percentage of NAV loans have been used to fund distributions, they are largely used for liquidity bridging purposes and to acquire additional investments. The use is also a key focus by rating agencies when rating NAV loans and they have found that 90% of NAV loans are used to add on investments in portfolio companies to drive growth and create value for the fund.
• With the ILPA guidance generally being supportive of NAVs, provided that there is clear transparency and building provisions into LPAs around NAV loans, there is a wide acknowledgement in the market now that NAV loans are a very flexible product that greatly benefit a fund, creating additional value for LPs which has been demonstrated through the performance of rated funds and valuations.

PANEL: Atypical Collateral Underwriting Considerations

• Discussions focused on the approach typically taken on the market in the context of atypical circumstances.
• The panellists agreed that the trend on the market over the past couple of years has been to require investor consent letters, especially where a dedicated SPV counts as one sole investor, or a limited number of them.
• The focus and concerns are around getting the due diligence right, getting investors to agree to fund commitments into the collateral account, require prior lender’s consent to any amendment to subscription agreements, side letters or the fund documents, and include carve out re lenders in any third-party beneficiaries provisions. All of these matters being critical in the presence of a single investor. Undertakings should normally be obtained from the parties which have the means to fund, i.e. not the SPV, if it is a shell company.
• Panellists insisted on the importance for parties to abide by a pragmatic and open-minded approach and solid existing transparent relationships. Any sensitivities or difficult topics should be discussed as early as possible, and not crystallise in the middle of a transaction.
• The case where one or two investors represent a large concentration of the commitments may come up at different stages of a fund life cycle. It is easier for lenders to get comfortable if, during the early fund-raising period, with the understanding that the concentration will be diluted over time. The situation would cause more sensitivities when linked to HNW Investors and transparency will be key from the outset.
• The umbrella facilities were perceived by panellists as more burdensome, especially given the increased KYC burden. It is, therefore, recommended to limit the number of funds admitted to the umbrella facility to a reasonable number (2 to 3 max). Interestingly, the audience polls showed that 48% were generally comfortable lending to umbrella facilities, and that 32% would only do so subject to existing relationships. 42% were comfortable advancing against HNW Investors up to 30% max, 16% up to 50%, 8% only to HNW Feeders and 21% without limitation (13% ruling it out entirely).
• As a conclusion panellists agreed this was an evolving space, still challenging for many institutions. The expectations were that we would see more ELTIFs in the subline space following the entry into force of the new regulation in 2023.

PANEL: The Future of Securitisation in Fund Finance

• The discussions covered two types of securitisations transactions in the fund finance space: the securitisation of LPs’ interests (CFOs) (historically strong on the credit card / ABS markets) and the securitisation of LPs commitments.
• The rationale for resorting to CFOs is that it allows managers to raise capital for underlying funds more efficiently. The other advantage is that the risk of repayment is transferred to the Master Trust which helps managing risk diversification requirements. One the key concern on these transactions will be to ensure the absence of limitations to the transfers of claims or of confidentiality restrictions in the underlying loan documents. The other key challenge for the market will to be try and apply eligibility criteria instead of rating each underlying exposure, which requires too much time and attention from rating agencies.
• The rationale for the capital call securitisation is that it helps address constraints resulting from the growing capital requirements regulations, diversifies funding solutions for GPs and fund managers and allows non-bank investors who want to operate in the field to step in, by investing in the tranches and gain exposure to these asset classes. This is relatively easy to implement given the broad scope of the definition of the securitisation under the EU Regulation on securitisation.
• A capital call securitisation consists essentially in the conversion of the assets (claims on investors) into securities for investors to invest. The assets are sold to a bankruptcy remote SPV (usually an orphan vehicle owned by a Dutch foundation or a charitable trust). This was perceived by the panellists as the future of the sublines as it allows all types of investors to participate in such assets (and not just banks or usual lenders). The cashflows are used to repay investors, whose right of recourse is limited to the underlying assets. The activity of the SV is limited to such securitisation operation and the subscription of additional debt is forbidden. The specific legal framework is well tested and two decades old in Luxembourg and offers a lot of contractual freedom.

PANEL: Ancillary Fund Finance Banking Products

• There are a couple of primary areas on which ancillary fund finance banking products focused – one being GP financing, where facilities are secured against the GP fees, for instance, in relation to bridging capital calls from the GP perspective.
• Another area discussed was management company financing which, similarly, can be secured against management fees.
• There are several reasons for such ancillary financing including dealing with the extended lifespan of funds, addressing financing buy-out requirements for exiting founders, operating expenses while awaiting the next round of management fees or other equity strategies.
• Key take aways are that funds and their GPs continue to look for bespoke products to deal with their specific borrowing needs and they want lenders who are partners with whom they can work that are responsive, flexible and innovative.