Fund finance has grown significantly in recent years – not only in scale but also in sophistication and diversity. Yet, it remains an often misunderstood and mischaracterised segment of the financial markets. Given its increasing importance to the success of private markets, it is essential to address misconceptions and foster greater transparency around the size, structure, and emerging characteristics of the fund finance market.

To support this goal, earlier this year we launched the Fund Finance Intelligence Survey, in collaboration with The Drawdown, to promote greater efficiency, liquidity, transparency, and sustainability within the market. The results are now in, and the anonymous, aggregated responses from borrowers, lenders and advisers have culminated in a valuable dataset that offers meaningful insights into market dynamics, growth trends and key challenges.

The LMA is pleased to have published the third in its series of Fund Finance Insights papers. These are intended to enhance understanding of this important asset class.

This third Insights paper turns to focus on NAV financing, with a focus on NAV financing used by buy-out managers (i.e. PE Nav financing).  Whilst PE NAV financing is not a new product, challenging market conditions and various other macro-factors, as well as broader market awareness around the benefits of the use of this type of fund finance product has attracted wider attention.    

There has been much talk about the growing role of NAV financing in fund finance. Whilst this is not a new product, it has been receiving increasing attention. In this LMA Talks Loan Markets podcast, we talked to ILPA, 17 Capital, BlueRock Advisory, Crestline Investors and King & Spalding to unpack the future of NAV financing.

The LMA welcomes ESMA’s general approach to template reform as set out in the Consultation Paper and supports the implementation of a simplified template for reporting of private securitisations in the short-term, ahead of the outcome of the Commission’s broader Securitisation Regulation review.  In particular, we believe that a simplified template should be made rapidly available for CLO reporting in order to provide relief for CLOs from the unduly onerous reporting burden under the current regime.

However (as set out in more detail in our response), ESMA’s proposal that the simplified template should only be made available for transactions where each sell-side entity is established in the EU is likely to limit applicability to European CLOs as very few will meet this requirement. Unless the issues mentioned in our response can be adequately addressed by ESMA, our preference would be to retain the current template reporting regime pending the outcome of the Commission’s broader Securitisation Regulation review