Results from Intralink’s survey of 200 global investors provided interesting and timely insight into LP allocation plans. According to the survey, 70% of LPs plan to increase allocations to private funds over the next 12 months. On the one hand, the survey results make sense in the context of a year in which intermediate liquidity products, such as high yield credit, disappointed while a liquidity barbell portfolio likely fared better. On the other hand, survey respondents were heavily weighted toward wealth management and family office investors, limiting its direct relevance to the institutionally driven fund finance market. While the positive sentiment indicator is certainly welcome, our base case continues to be for a year-over-year decline in fundraising next year as the rate of capital recycling in private markets slow.
The size of the NAV loan market currently measures around $100 billion and is poised to grow to $700 billion by 2030, according to an estimate from 17Capital cited in a Bloomberg article this week. NAV loan origination volume is accelerating as other sources of funding prove more challenging and deal exits are put on hold. 17Capital reports originating $5 billion in NAV loans and pref equity over the past 12 months. The article, “Private Equity Funds Tap Exotic Loans for Liquidity as Deals Ebb,” is available to Bloomberg subscribers here.
Mark your calendars for the FFA’s 12th annual Global Fund Finance Symposium, scheduled for February 8-10, 2023 in Miami Beach, Florida. Visit the FFA site for more info.
As the traditional subscription facility market has matured, new liquidity and funding innovations have arisen. Enter the rated note feeder. This structural tool in the back pocket of GPs may ease the accessibility of private equity to investors that need to commit capital via a debt commitment and enhance investor returns through collateralized fund obligations. While the use of rated note feeders has gained significant traction over the last couple of years, implementing this structure in connection with a credit facility is fraught with questions. This article provides a background on rated note feeders against the backdrop of fund finance, discusses issues of enforceability in the event of a fund bankruptcy, and dissects the nuances of protective provisions you can use for a rated note feeder in your next fund finance deal.
Cadwalader Fund Finance attorney James Hoggett has been promoted to Special Counsel, effective January 1, 2023.
James, who is based in London, focuses on fund finance, advising both lenders and GPs on a wide range of products, including subscription lines, asset-backed and hybrid facilities, as well as GP support and co-invest structures. His experience covers all asset classes and includes acting on several multibillion dollar facilities to leading primary and secondary funds. Congrats, James!
Third time’s the charm! FFA hosted its 4th Annual APAC Symposium in Singapore on November 3, but for the first time in three years, it was live and in-person to discuss the latest trends and challenges in the industry. Did you miss the forum? Don’t miss the content, too: read the top takeaways from Mourant from the panel discussions here.
On 1 September 2022, the Limited Liability Companies (Jersey) Law 2018 came into force, allowing limited liability companies to be established in Jersey. Jersey has introduced the LLC to attract U.S. investment by creating a vehicle familiar to U.S. clients. In October 2021, Jersey Finance published research showing that the assets managed by promoters with U.S. origin have increased by 230% in the last five years. Appleby’s experience would suggest that this figure has continued to grow since then.
Total private capital assets management have doubled in the past six years to reach $12 trillion. In The New Dynamics of Private Markets, PGIM analysts take a long-term view of the context of this growth and the future direction mainly as it affects investors. Highlights of the report include the discussion on private credit where there appears to be plenty of runway for further growth, and the estimate for potential overall private capital growth from retail participation through, for example, greater defined contribution plan participation.
The Drawdown recently published its latest Fund Finance Tracker, which provides a detailed breakdown of lender data in subscription lines, NAV lines, and GP facilities over the last six months. The statistics offer insight into the type, size, location, and investment strategy of recent Fund Finance deals. In addition to the tracker, the article also highlights emerging Fund Finance trends, such as increased selectiveness by lenders and the uptick in ESG-focused facilities. To read more, please click here.
A big thank you to the more than 500 industry leaders who participated in last week's 2022 Cadwalader Finance Forum in Charlotte. And a special acknowledgment to the nearly 50 speakers – both industry experts and Cadwalader attorneys – whose perspectives made the Forum so valuable for all attendees. See our full list of speakers here.