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It’s already been two weeks since we wrapped up the Cadwalader Finance Forum in Charlotte, which featured a panel on “New Approaches in the NAV and Secondary Market.” The panelists provided attendees with an entertaining and very educational discussion explaining what exactly is NAV finance (see summary of panel discussion here). Given the packed crowd for the panel and the general buzz at the conference, it should be obvious to even the casual observer that interest in NAV finance is at an all-time high (which is saying something since it has consistently been one of the hot topics at industry conferences in recent years). So, as we enter the home stretch of 2023, we wanted to reflect this week on the state of the U.S. NAV finance market and provide some thoughts on trends we are observing and what we are hearing in the market as we get ready to wrap up what has been a dynamic year.
Articles
This year has seen a significant amount of consolidation of sponsors in the private equity market, and this is a trend that is predicted to continue throughout 2024 and beyond.
While nearly all fund finance transactions have change-of-control triggers, such mergers and takeovers between sponsors can present a number of issues in established financings which, at their extreme, may ultimately result in such financing transactions coming to an end.
In this article, we seek to explore some considerations around the impact that private equity manager consolidation may have on fund financings (although it is worth keeping in mind that public listings of an asset manager may also trigger a change of control.)
Higher interest rates have rearranged the investment landscape with liquid products offering more attractive value while forward private market returns are somewhat uncertain in light of challenges facing valuations and the path to realization. Given this setup, Private Equity International latest edition investor survey, provides timely insight into LP priorities.
Here’s a slice of what we’re reading (and listening to) this week!
Driving change at the leadership level requires a strategic approach to hiring and career development, says Women in Fund Finance global co-head Dee Dee Sklar. Read more in Private Equity International here.
The early read on fundraising through Q3 from Pitchbook is likely to be a pleasant surprise relative to expectations. For YTD through Q3, 3,400 private funds closed globally, putting the private capital raised 14% below the year-earlier total. Focusing on PE, capital raised in Q3 was the highest to date in 2023, with $5-billion plus funds representing 47% of the total raised. Secondaries fundraising in just the first three quarters surpassed yearly totals going back to 2020.
The full report is available here.
The EMEA FFA NextGen Committee invites you to join them for 2023 Christmas Drinks, hosted by Simmons & Simmons.
It’s not unusual for new products to come under scrutiny in their ‘growing up’ phase, but some concerns around NAV loans may be misplaced.
(This article originally appeared in Private Equity International. You can view the article here.)
On Thursday 30 November, Cadwalader’s Women’s Leadership Initiative (“WLI”) hosted the first Girls in Finance day in London.
The WLI welcomed 20 students from the Eden Girls’ School in collaboration with the East London Business Alliance to Cadwalader’s London offices, for an immersive morning learning about careers in finance and an array of finance concepts.
The FFA APAC team invites you to join them for an evening of networking! Please join for drinks, canapes, and an opportunity to socialize and celebrate the year with colleagues and associates in the fund finance industry.
The event will be hosted simultaneously in Hong Kong, Singapore, and Sydney on December 7, 2023.
Recallable capital is a hot topic these days in both subscription financing and NAV financing transactions, both at industry events and in the press. There has been a good deal of attention to this concept in the NAV market in particular over the past few weeks. I recently attended an event for women in the private equity secondaries market and while making small talk over some (excellent) wine I happened to mention that I am a fund finance lawyer. Immediately, a number of people wanted to talk about recallable NAV loans – there was some urgency to the conversation and a bit of indignance.
As I will explain below, there are certain features of the current economic environment which have increased the focus on the rights of a general partner to recall distributions and the provisions in a limited partnership agreement that give rise to these rights. Although there has been some excitement over these provisions, it is the current environment that has brought these provisions – which are contained in nearly every limited partnership agreement (“LPA”) – into focus, rather than anything particular to subscription or NAV financing arrangements generally.