Sherri Snelson

NAV and Holdco back leverage facilities: balancing stakeholder interests to maximise value creation

The rapid evolution of fund finance has propelled Net Asset Value and Holdco back leverage facilities (that is, facilities in which one or more holding companies below the fund enter the financing) to the forefront of liquidity and portfolio management for funds across asset classes. These facilities, which allow funds to borrow against the value of their underlying investments, have become increasingly sophisticated and prevalent. As the market matures, both limited partners and lenders are sharpening their focus on transparency, risk management and enforceability. This article explores the practical realities of collateral enforcement, the legal guardrails being adopted, and the value these facilities can unlock; balancing the perspectives and interests of limited partners, general partners, and lenders.

Fund finance and sustainability: new guidance on the application of the SLLPs

Over recent years there has been significant growth and development in the fund finance industry, which has expanded over the last decade into a global market now worth more than US$600bn, according to the asset manager abrdn. As the market has continue to mature, the variety of tools available to investors (which include private equity, private credit and venture capital) to fund their operations has expanded considerably beyond the traditional subscription facility to encompass many more types of fund financing. One such innovation has been the introduction and adoption of sustainable finance, either by the way of use of proceeds facilities (green loans) or sustainability-linked loan facilities.

In light of the increased use of ESG-linked financing in the fund finance market, on 5 March 2024 the Loan Market Association, Asia Pacific Loan Market Association, Loan Syndications and Trading Association and the Fund Finance Association published 'A Guide to the Application of the Sustainability Linked Loan Principles in Fund Finance' (Guide), which provides practical guidance to market participants on how the Sustainability Linked Loan Principles can be used the fund finance market, as well as identifying and addressing challenges and considerations  particular to fund finance transactions.

In this article we will examine the use of sustainability-linked financing in the fund finance market and consider some of the issues raised by the Guide.