Trust is the lifeblood of private equity. For decades, investors have committed capital to blind pool funds, fully aware that they will have little control over what happens next. That trust has seen the private equity buyout industry grow to managing over $4 trillion of assets today.
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This paper presents key observations on NAV loans made to private equity funds, gained from our experience deploying the 17Capital Credit Fund over the past five years. It aims to clarify the role of NAV loans and explain how they create value for LPs in private equity funds. Before providing our insights, it’s worth reflecting on the origins of the NAV finance market and 17Capital’s role in its development.
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In the last two years, we’ve seen a notable shift towards NAV loans being used to increase investment capacity, with most now being deployed to finance new platform investments, support follow-on investments in existing portfolios, or fund value creation initiatives for portfolio companies. The loans are enabling funds to invest closer to 100% of commitments, which is enhancing returns for investors and lowering the proportion of management fees paid relative to invested capital.
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Private credit investors seeking attractive, consistent returns might consider private credit funds that focus on lending directly to private equity firms, as opposed to their underlying portfolio companies. By investing in such funds, they finance the growth of private equity firms through credit instruments which are non-permanent and self-liquidating, resulting in a predictable cash flow profile with low volatility. The total enterprise value of private equity managers has been estimated at well over $500 billion, providing a deep addressable market for specialized financing providers in this space.
Read More Learn all about NAV finance here, a rapidly growing segment of the private credit landscape, with Armen Panossian (Co-CEO and Head of Performing Credit, Oaktree) and Pierre-Antoine de Selancy (Co-founder and Managing Partner, 17Capital).
Read More We’ve put together a simple explanation of NAV financing also known as NAV-based finance and Portfolio finance, first we look at what it is, we then focus on who uses it and what they use it for. If you’d prefer to listen to someone explain it watch our video using the button below.
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Dane Graham of 17Capital discusses the rise of NAV finance, why it’s gaining traction with insurers, and how it fits into the broader private credit market.
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Republished from Bain and Company - We ask a leading provider of NAV loans about the enthusiasm and the skepticism around a growing trend.
Read More NAV finance used to be a niche, little known corner of debt capital markets, but over the past 10 years it has evolved into a firmly established part of the private markets ecosystem.
Read More Listen here to the latest episode of The Insight by Oaktree Capital for an in-depth conversation about NAV finance, a rapidly growing segment of the private credit landscape, with the co-founder Pierre-Antoine de Selancy. He explains what NAV finance is, why it has become so popular, and why its growth is likely to accelerate in the coming years.
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