NAV Financing

Private equity NAV financing is typically secured against buyout-stage private equity funds, where underlying assets are more mature and generate more predictable cash flows. This provides lenders with greater visibility on performance and exit timelines, resulting in lower risk structures, more stable pricing, and longer-term NAV financing solutions.

Venture capital NAV financing, by contrast, is secured against growth-stage venture capital funds, where investments are earlier in their lifecycle and outcomes are less certain. While this introduces a higher risk profile, it also offers greater upside potential. As a result, venture capital NAV financing structures are often more flexible and may include participation features to align with the performance of the underlying portfolio.

Yes. NAV financing allows borrowers to borrow against private equity and venture capital fund interests, including both GP and LP stakes. This form of financing is secured against the underlying value of the fund portfolio, rather than personal income or liquid assets.

By using NAV financing, investors can access liquidity without selling fund positions or waiting for distributions, enabling them to retain full exposure to future upside while unlocking capital for other opportunities.

NAV financing is typically used by General Partners (GPs), Limited Partners (LPs), fund managers, and senior professionals with exposure to private equity or venture capital investments, including carried interest.

These individuals often have significant capital tied up in private market fund interests, but require liquidity without selling positions. NAV financing provides a solution by enabling them to unlock liquidity from private equity and venture capital portfolios while maintaining full exposure to future returns.

NAV financing is secured against illiquid private equity and venture capital fund interests, meaning valuation and timing are key considerations. Unlike public markets, these assets are not continuously priced, so lenders rely on conservative loan-to-value ratios and structured downside protection to mitigate risk.

Legal and structural factors also play an important role. Fund documentation, shareholder agreements, and transfer restrictions can affect how financing is arranged and enforced. As a result, NAV financing requires careful underwriting and specialist structuring to balance flexibility with effective risk management.

NAV financing is structured around the value and characteristics of underlying fund interests, with lenders placing significant emphasis on risk management and downside protection.

A key consideration is the illiquidity of private equity and venture capital investments, as these assets cannot be easily sold. Valuation is also less frequent than in public markets, meaning timing and accuracy of NAV assessments are critical to structuring the facility.

Legal structure plays an important role, with fund documentation, transfer restrictions, and ownership rights all influencing how lending can be arranged and enforced. To mitigate these factors, lenders apply conservative loan-to-value ratios and robust downside protection mechanisms, ensuring the structure remains resilient across different market conditions.

In many cases, NAV financing can be structured on a non-recourse basis, meaning the loan is secured primarily against the underlying fund interests rather than the borrower’s wider personal assets.

However, this depends on the strength and diversification of the portfolio, as well as the lender’s risk appetite. In some situations, additional support such as guarantees or supplementary collateral may be required to enhance terms.

Timelines for NAV financing vary depending on the complexity of the structure and the underlying fund portfolio.

For well-documented private equity or venture capital exposures, indicative terms can often be provided relatively quickly, with full execution typically taking a number of weeks. Transactions involving more complex structures or multiple fund interests may require additional time for due diligence and structuring.

NAV (Net Asset Value) financing is typically used by investors and fund managers to unlock liquidity from their private equity, venture capital, or alternative investment portfolios without needing to exit underlying positions.

Common uses include portfolio diversification, capital calls, follow-on investments, refinancing existing facilities, bridging short-term liquidity gaps, or funding personal or corporate opportunities while maintaining long-term exposure to the underlying funds.

Because NAV financing is structured against the value of fund interests rather than individual underlying assets, it is generally used by sophisticated investors who are comfortable with fund-level leverage and longer-term investment horizons. Lenders will assess the quality, diversification, and liquidity profile of the portfolio when structuring the facility.

Working with a specialist broker can help ensure the financing structure aligns with the investor’s broader strategy and the specific characteristics of the underlying fund holdings.

Carried interest is a share of the profits generated by a private equity, venture capital or similar investment fund that is allocated to the General Partner or fund management team when certain performance conditions have been met. Unlike a management fee, carried interest is typically realised only after investors have received their original capital and any agreed preferred return. Because these future distributions can represent a significant asset, specialist lenders may, in certain circumstances, structure financing against anticipated carried interest, allowing fund managers and partners to access liquidity before those proceeds are received.

Yes, in certain circumstances, specialist lenders may structure finance against anticipated carried interest distributions. Unlike conventional lending, these facilities are not based solely on salary or annual income. Instead, lenders assess the expected value and timing of future carried interest payments alongside the borrower's wider financial position.

Every transaction is bespoke. A lender will typically consider factors such as the maturity and performance of the underlying fund, the borrower's legal entitlement to carried interest, the expected timing of future distributions and the overall strength of their balance sheet. Depending on the circumstances, additional security or assets may also form part of the lending structure.

Because carried interest is often realised several years after investments are made, financing can provide liquidity before distributions are received. This may allow fund managers and General Partners to fund new investments, meet GP commitments, purchase property or access capital for other strategic purposes without waiting for future exits.

Specialist lenders undertake bespoke underwriting, assessing factors such as the underlying fund's performance, remaining investment life, anticipated exit events and the borrower's legal entitlement to future carry.

The financing structure is tailored to each transaction. Depending on the borrower and fund, security may be taken over carried interest rights alone or alongside other assets, while repayment is typically linked to future carried interest distributions through an agreed cash-sweep mechanism. As distributions are received, they are used to repay the outstanding facility in accordance with the agreed lending terms.

These facilities can be arranged across a range of jurisdictions, including the UK, Europe and the United States, with the legal structure adapted to reflect the fund's domicile, governing documentation and the borrower's wider asset position. Because every fund and distribution profile is different, no two transactions are exactly alike.

While every transaction is individually structured, a typical facility may include:

• Interest rate: Approximately 12%-18% per annum
• Term: Up to five years
• Interest structure: Payment-in-kind (PIK) or cash-pay
• Repayment: A full cash sweep of future carried interest distributions
• No-call period: Approximately 18 months
• Arrangement fee: Approximately 2%

These terms are indicative only. The final structure, pricing and security requirements depend on factors such as the underlying fund, the expected timing and value of future distributions, the legal structure of the carried interest and the borrower's wider financial position.

As carried interest distributions are received, they are typically used to repay the outstanding balance of the facility under the agreed repayment structure. Depending on the circumstances, financing may be used to fund GP commitments, co-investments, property acquisitions or other strategic liquidity requirements before carried interest is realised.

For many private equity professionals, carried interest can represent a significant portion of their long-term wealth. However, distributions are often tied to the timing of portfolio company exits, meaning substantial value may remain inaccessible for several years.

Borrowing against anticipated carried interest can provide earlier access to liquidity without requiring borrowers to dispose of investments or wait for distributions to be realised. Depending on the structure of the facility, financing may be used for a range of purposes, including:

• Meeting GP commitment obligations in new or existing funds
• Funding co-investments alongside portfolio transactions
• Purchasing or refinancing residential or commercial property
• Diversifying personal investments or managing wider wealth planning
• Supporting other significant personal or business funding requirements

Because every fund, distribution profile and borrower is different, facilities are individually tailored to reflect the expected timing of future distributions, the underlying fund structure and the borrower's wider objectives.

It depends on the structure of the transaction. Some carried interest financing facilities may require a personal guarantee or additional security, while others may be secured primarily against the borrower's carried interest entitlement or other assets. The requirement for a personal guarantee will depend on factors such as the expected value and timing of future distributions, the underlying fund, the legal structure of the carried interest and the borrower's wider financial position.

Because every facility is individually structured, the security package is determined on a case-by-case basis rather than through a standard lending policy.

Repayment is typically linked to future carried interest distributions. As distributions are received from the underlying fund, they are used to repay the outstanding balance of the facility through an agreed cash-sweep mechanism. Depending on the transaction, the loan may also include a combination of payment-in-kind (PIK) or cash-pay interest during the term.

Because every facility is bespoke, the repayment structure will depend on factors such as the expected timing and value of future distributions, the underlying fund and the borrower's wider financial position.

A 20% carried interest means the fund manager or General Partner is entitled to receive 20% of the profits generated by a private equity or venture capital fund once investors have received their original capital and any agreed preferred return. The remaining profits are typically distributed to the fund's investors in accordance with the fund's partnership agreement.

For borrowers, the importance of carried interest lies in the potential value of those future distributions. Where there is a clear legal entitlement and a credible expectation of future payments, specialist lenders may, in certain circumstances, structure finance against anticipated carried interest before distributions are received.

No. Although both reward investment performance, carried interest and performance fees are different. Carried interest is the share of profits earned by a private equity or venture capital fund's General Partner after investors have received their original capital and any agreed preferred return. A performance fee, by contrast, is typically charged by hedge funds or investment managers as a percentage of investment gains and is usually calculated over shorter performance periods.

For lending purposes, specialist finance secured against carried interest is based on the borrower's anticipated future carried interest distributions rather than performance fees or other forms of investment income.