PE Capital Call Line
I currently work at a PE Fund and will begin having significant capital calls as we deploy the fund. We don't have a capital line in place for members of the fund to fund their capital commitment with, so I was wondering if anyone here knows of any banks that establish personal capital call lines for employees of PE funds to fund their capital calls. I'm looking to fund my capital calls in cash, but in the event I'm tight on cash from rapid deployment, I'm looking to set up a facility to be able to draw on a line to fund my investment.
What have others done in the past? Have others used personal line of credits or home equity lines? Any ideas would be helpful.
Interested in this as well, particularly in regard to the typical interest rates and other general terms of these credit arrangements (e.g. upon leaving said PE firm with borrowed capital still tied-up in investments, will the lending facility have some sort of automatic repayment trigger that is executed?)
Edit: To the OP's original question, check out First Republic and Silicon Valley Bank. Both offer solutions that you are looking for.
First Republic - https://www.firstrepublic.com/business/business-lending/private-equity-…
Silicon Valley Bank - https://www.svb.com/private-equity-venture-capital
I spoke to First Republic. They do capital lines at the fund level but not at the individual level. They however will do a personal line of credit which starts at $60k but requires 1.5x of cash or equities in a non retirement account on hand (so $90 minimum), and they don't give any credit for illiquid securities (like PE investments), so makes it kind of hard to qualify.
I'd say this looks pretty promising:
https://www.svb.com/private-bank/investors
Hey there - just came across this thread and a message for those who are looking for similar answers. My research has indicated that a HELOC is by far the best option here if you own a home with equity value in it. The interest rate is often Prime or Prime + 50 and and you can usually negotiate away any unused commitment fees. Eg my mortgage provider is offering up to $150K at Prime + 50 with $500 closing costs and no early payment penalty. It's basically a free source of liquidity with more flexible draw and repayment terms. Granted, the risk is higher, since the collateral is your home...
Hope this helps
SunTzu
Hmm the fund will usually have a relationship with an existing bank. Maybe worth asking the fund to set up a real relationship but offer to lead the project?
I would ask your CFO, as I'm sure he's had lenders pitch him on just this sort of thing.
I’m looking at taking out a portfolio line for this purpose, but would love to hear if anyone has any insight into what the rates on a dedicated capital call line look like
LIBOR + 150 to 200 bps
25-30 bps on unused portion
Source: I am in this field.
Banks that offer capital call line / subscription line:
Jpm’s fund finance business went to MUFG a couple of years ago for what it’s worth. A lot of banks got out of that business
That's not true. JPM still offers this. If anything more banks are entering this space. The product is low-risk with high utilization rate and great for getting relationship business whether that's IB advisory and market related services.
This is a small sample size that's not perfectly comparable, but I'd point you to SVB, JPM, and Signature.
I don't have perfectly relevant experience with this because when I wanted it solely for myself, I was showing more collateral than guys in their 20s generally can, and later when I set it up for my junior guys, it worked exactly the way you're noticing it does best - the firm amortizes its own banking relationship to make such the product is available to the people who work there.
First Republic is a love-hate thing. You love them because their technology looks like it's within a decade of today, their client service and general attitude is refreshingly pleasant, and the overall feel of the institution is good. You hate them because they're conservative in every way possible when it comes to underwriting.
For what it's worth, I think there needs to be some innovation on this product you're discussing. I had no idea half of the logos someone mentioned in another comment were in this space.
Have you looked into Interactive Broker's margin portfolio account? Lowest rates you can find. Plus, I think you can lever up probably as much as you'd feel comfortable with if needed.
Also, I know Wealthfront offers a personal LOC that allows you to draw down up to 30% of your total portfolio value, and in real-time.
FYI -- I'm in a similar position. Just posted a new thread to see if any bites:
https://www.wallstreetoasis.com/forums/portfolio-margin-borrowing-for-l…
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