NAV Lending

NAV lending provides financing at the fund or portfolio level, typically secured by a diversified pool of assets and cash flows. It is increasingly used for liquidity management, bridging, and capital efficiency.

From an allocator perspective, NAV lending is defined by governance and valuation risk as much as credit risk.

How allocators define NAV Lending exposure

Segmentation includes:

• Borrower: GP/fund vehicle vs portfolio company holdco
• Collateral: asset pool quality, diversification, and cash-flow visibility
• Structure: LTV, covenants, cash traps, amortization
• Valuation integrity: reliance on marks, lag, and policy differences
• Control rights: step-in rights, restrictions, information rights
• Repayment source: distributions, exits, refinancing—under stress scenarios

Allocator framing:
“If distributions slow and marks lag reality, what forces repayment?”

Core strategies within NAV Lending

• Subscription/NAV hybrids: blended collateral dynamics
• Fund-level liquidity facilities: smoothing capital timing
• Portfolio-level lending: secured by specific asset pools

How NAV Lending fits into allocator portfolios

Used to:

• Access secured credit with diversification benefits
• Provide structured yield with defined collateral coverage
• Add a niche credit sleeve when governance is strong

How allocators evaluate managers

Conviction increases when there is:

• Conservative LTV and credible stress testing
• Strong covenant and cash-trap design
• Transparent valuation policy and independent checks
• Clear enforcement playbooks and governance rights
• No dependence on perpetual refinancing

What slows allocator decision-making

Common blockers:

• Overreliance on stated NAV and stale marks
• Weak information rights or limited control in stress
• Correlated assets inside the pool (false diversification)
• Ambiguity on cash flow timing and repayment priority

Common misconceptions

• “NAV is objective” → it’s an estimate, and timing matters.
• “Diversified collateral means safe” → correlations rise in stress.
• “It’s just a credit line” → governance defines whether it behaves like credit.

Key allocator questions

• What happens if exits pause for 12–24 months?
• How are marks validated and updated?
• What covenants trigger cash traps or amortization?
• What are the enforcement rights and step-in mechanics?
• How is asset correlation and concentration controlled?