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SMAs are hot in 2025. One of the busiest aspects of our practice this year across many of our lender clients has been subscription facilities for separately managed accounts (“SMAs”). While these deals have been an important part of our practice for a long time, they have a popularity and velocity that we have not seen before, and we are on pace to close the most SMA facilities we have ever closed in a single year in 2025.
As we power through what remains of this quarter, working to get deals closed before quarter end next week, you may have noticed some additional (and new!) blacklining in the tax section of your credit agreement thanks to a bill that is currently in the Senate. We are seeing new terms coming into credit agreements to include certain language in the tax provisions that wasn’t there before.
In our last Fund Finance Friday for the quarter, we dive into what’s driving these eleventh hour comments, how they are being dealt with, and who bears the risk of this so-called “revenge tax” when it comes to your fund finance deal.
Fund finance is and always has been by nature a cross border enterprise. While there are a number of lenders that we represent in the United States that lend to funds exclusively organized in the U.S.– typically in Delaware – that is as a general matter the exception rather than the rule. Given a confluence of factors, including the home jurisdiction of certain investors, tax, and other legal and economic considerations, most fund structures also feature entities organized outside the U.S., most typically in Canada, Cayman, Ireland, Luxembourg, and other European jurisdictions. Therefore, there are cross-border considerations in almost every fund finance deal. Our wonderful stable of local counsel is a critical part of these transactions by drafting and negotiating provisions that are relevant to the legal constructs of the jurisdictions in question, in particular those that relate to the existence, power and authority of such entities, the grant and perfection of security interests, and advising on mechanics that may be unique to the account structure or depositary arrangements, in these jurisdictions.
While the paragraph above gives some perspective on our day-to-day U.S. practice, the subject of this article is slightly different in perspective. In deals originated out of our London fund finance practice, we frequently work alongside our London colleagues to act as their local counsel in connection with English law governed credit or facilities agreement featuring U.S. obligors.
The intersection of fund finance and securitization is an intense focus of the fund finance industry. So much so that just yesterday, Cadwalader hosted a first-of-its-kind Capital Call Securitization Conference in our New York office to an absolutely packed house with a standing room only crowd.
Securitization of sublines continues to be the hottest of hot topics in fund finance. Whether it could be done, how to do it, and how to overcome certain real and perceived challenges were topics of countless articles and conversations among practitioners and their clients for quite some time, but that all changed in 2024 when we truly saw the dawn of the securitization era for fund finance.
In this week’s Fund Finance Friday, we follow up our primer on capital call securitization piece with an overview of some of the different approaches that can come into play in a securitization of subscription facilities.
Securitization has been a major focus in the fund finance industry as of late. Due to a confluence of factors, some of which are specific to fund finance, and some of which are features of the broader economic environment, it seems that fund finance has firmly entered its securitization era. To underscore the incredible amount of interest in the subject, just a few months ago, in June, Cadwalader was a lead sponsor to an extremely well-attended Securitization in Fund Finance conference held in New York. Then, most recently, there was major news in fund finance with the first broadly syndicated publicly rated securitization of sublines hitting the market. We are working on a number of these transactions here.
You, dear reader, may have noticed people discussing these transactions with great interest and predicting where the market may be headed, but what are they actually referring to and how do these deals work? Today, we break that down for you with this summary of ‘why now?’, a description of basic securitization structures, and some additional context you may not have considered.
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The American Bar Association Business Law Section hosted its fall meeting in San Diego earlier this month. For those readers not familiar with this event, this is a massive gathering of business law professionals from around the world. It includes more than 50 continuing legal education programs and other discussions and events that involve public officials and business law practitioners with about 4,500 attendees from more than 25 countries and more than 300 speakers leading those sessions or serving as panelists.
This week, the U.S. Court of Appeals for the Fifth Circuit vacated the private fund advisor rules adopted by the United States Securities Exchange Commission. The Final Rule imposed significant regulatory requirements on advisors to private equity funds, hedge funds and other private funds. It represented a significant expansion of the SEC’s power to regulate private fund advisers and investors and, according to the decision, compliance with the Final Rule would cost the private funds market $5.4 billion and require millions of hours of employee time.
One of the best things about fund finance is that there is always something new and exciting happening in our space. New players come online, and new products and solutions solve issues that pave the way for fund borrowers to access capital and for lenders to get deals done. Often novelty is borne out of necessity, and that is very much the case with the increasing use of credit ratings in the subscription finance space. Here we will explain why we are seeing more credit ratings for sublines and issues that agents, lenders and fund borrowers should consider when negotiating a subline where the parties may ultimately seek a credit rating.
It was an honor to represent our Fund Finance team and join my Cadwalader colleagues this week at the 2024 Gotham Ball on behalf of Food Bank For New York City!