Thoughts on Fund Finance?
Anyone in this field? Who are some top players? I understand that there are different types of fund financing products.
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Based on the WSO Dataset, Fund Finance is a niche but growing area within finance that provides liquidity solutions to investment funds. It's a sector that has seen significant growth due to the increasing complexity of investment strategies and the need for funds to have flexible financing options. Fund Finance can include subscription line facilities, NAV (Net Asset Value) facilities, and hybrid facilities, among others. These products allow funds to manage their liquidity more efficiently, bridge capital calls, or leverage their portfolios for additional investments.
While the context doesn't specifically list the top players in Fund Finance, it's common knowledge within the industry that major banks and specialized financial institutions lead in this space. Firms like J.P. Morgan, Goldman Sachs, and Citibank are known to have significant fund finance operations. Additionally, specialized entities such as Investec and Silicon Valley Bank are also key contributors, offering tailored solutions that cater to the unique needs of investment funds.
The different types of fund financing products serve various purposes:
Subscription Line Facilities: These are revolving credit facilities secured by the uncalled capital commitments of the fund’s investors. They are typically used to bridge the gap between making investments and calling capital from investors, allowing for quicker execution of investments.
NAV Facilities: These loans are secured by the net asset value of the fund's investments. They provide liquidity based on the value of the fund's existing portfolio rather than its uncalled capital commitments.
Hybrid Facilities: Combining elements of both subscription line and NAV facilities, hybrid facilities offer flexibility in collateral and use of proceeds, catering to the specific needs of the fund.
The choice among these products depends on the fund's strategy, the composition of its investor base, and its liquidity needs. As the fund finance market evolves, we're likely to see further innovation and customization in these products to meet the diverse needs of funds across different asset classes.
Sources: Best direct lending shops in Asia, Differences between Co-invest and Secondaries?, PE Fund Performance: Anyone Can Hit Top Quartile Once, but Consistently?, Top Climate Funds, Funds that play League of Legends
JPM, Wells, MUFG,PNC, Stan Chart,
Happy to answer any specific questions. As you point out, one category is LP looking fund finance (sublines, banks mostly), the other assets (NAV) only (some banks but mostly private credit funds).
From NAV only side, leading players are 17Capital (fund/GP/manco level), AlpInvest, Ares, Apollo (fund level), Crestline, Hark, Whitehorse (only GP level); HPS and Pemberton also trying to get in. Some more active banks here are Barclays, DB, Citi, some Japanese, etc (note GS is out more or less). There are also active secondary LPs like AlpInvest, LGT, GSAM, CPPIB, CDPQ, etc.
Growing space in general…
What are your thoughts on doing a career in NAV Lending at a large Credit shop?
Does it not pigeonhole you? Do you find it interesting (guess you go less in depth than traditional Private Credit but get to look at more assets)?
As everything in life, it depends. It may pigeonhole you in some areas, but equally also may open new doors. Less single asset focus, more wholistic picture focus (portfolio collateral view). So depends what you are after at this stage in your career. Generally lifestyle should be better compared to private credit with comparable comp. I would personally focus more on what would make you happy as an individual/lifewise vs. considering corporate ladder theory. Either one of the options is asking LPs for money and investing it (one way or the other) at the end of the day.
Currently in this product within Asia. Some of the recurring banks I see in deals are JPM, ANZ, MUFG, DBS and StanChart. Yes, there are different Fund Finance products with the most popular one being a subscription finance facility / capital call facility, which is simply a revolver that is secured by the uncalled capital of the LP's. The other main product is a NAV facility. If you can get into a team that looks at NAV facilities your life will be much more interesting as there are many forms of NAVs. These can include your standard NAV provided to an infra fund, a NAV provided to a geared share fund to assist with their leverage and then facilities provided to an SMA to increase their overall leverage within another fund.
Thanks this is super useful - do you not what comp/exit opps look like for teams focussed on the NAV side?
Id imagine if you're in a team focussed on NAV you'd be able to leverage that experience to jump to a private credit provider. Comp varies widely and mainly comes down to where your Fund Finance team is placed in the bank e.g. an FF team which sits as its own product at a large IB will typically pay more than an FF team which sits within the coverage team at a commercial bank. Bonuses are good for the work/life balance you get. Analyst would be 20-30%, associate 30-50%, VP 40-60% (of base salary)
Thanks. Do you know which bank is doing NAV facility in Asia?
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