NAV Financings and Preferred Equity: What Are They and Why Are They Used?

In a changing economic landscape, fund sponsors are increasingly conscious of the need to shore up liquidity, whether to take advantage of the opportunities that the market presents, as a defensive measure to protect value in existing portfolios, or as a component of a longer-term strategy.

Over the past few years, innovations in fund finance have given sponsors an increasing number of options to address liquidity requirements.

In particular, we now see increasing demand for liquidity by way of asset based of NAV Financing (NAV) and preferred equity (Pref), with a strong market of providers such as traditional bank lenders, new bank entrants to the market, and non-bank lenders (including private credit funds).

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