Victor Boys | Director at JLL | MRICS Chartered Surveyor
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Private equity (PE) is no longer just about leveraged buyouts and portfolio company performance. Increasingly, private credit investors are discovering opportunities by financing the business of private equity itself—specifically through lending directly to PE firms and their management companies. These financing arrangements generate predictable, low-volatility returns and offer a compelling proposition to investors seeking stable income amid economic uncertainty.
As an MRICS Chartered Surveyor, I’ve seen first-hand how strategic financing tools can enhance asset performance in the real estate world. Similarly, for PE firms, bespoke capital solutions—particularly management company financing—are enhancing their operational and investment strategies without compromising ownership or long-term value.
A Deep Market with Strategic Value
The total enterprise value of private equity managers has been estimated at over $500 billion, offering a deep and resilient market for targeted credit solutions. Leading providers, have built strategies around Net Asset Value (NAV) financing, focusing on the firms themselves rather than their portfolio companies.
This financing is typically serviced through a combination of GP commitments, management fees, and carried interest—all predictable and recurring cash flow streams. Importantly, this form of credit doesn’t require equity dilution and is self-liquidating, aligning well with a PE firm’s cash cycle and long-term strategic plans.
Real-World Use Cases: Growth, Liquidity & Succession
In today’s capital-intensive PE landscape, GPs are committing more of their own money—often 5% or more of fund capital, compared to just 2-3% a decade ago. Simultaneously, exits and realizations have slowed, creating a liquidity gap. Management company financing helps fill that gap.
Some of the key use cases include:
- Platform Expansion: Raising funds to invest alongside LPs or expand into new verticals (e.g., credit, infrastructure, or secondaries).
- Ownership Transition: Facilitating internal succession by enabling rising partners to acquire stakes from founders or repurchase shares from passive investors.
- Strategic Acquisitions: For example, a PE firm may secure $250 million in financing to acquire a credit asset manager, repaid through their balance sheet-linked distributions without impacting external LPs.
This method allows the firm to retain control and economic upside while benefiting from near-term liquidity. It’s a model that mirrors intelligent asset-backed financing seen in other sectors—including property, where I’ve supported firms in similar long-term strategies.
A Robust Opportunity for Private Credit Investors
For private credit funds, management company financing presents an appealing combination of:
- Strong borrower profiles (institutional-grade GPs with proven track records)
- Diversification (exposure across sectors, vintages, and multiple funds)
- Structural seniority (priority claim over manager-generated cash flows)
These deals are often secured against GP balance sheet commitments and structured to ensure that interest and principal are repaid first when liquidity is generated. According to Graham, “Everything we do is self-liquidating—repeatable and flexible, without impacting fund operations or LP relationships.”
It’s worth noting that other sectors are now exploring similar principles. Farooq Hakim, a digital transformation leader with over 30 years in telecoms and IT, highlights how businesses in sectors like cloud and AI are also leveraging non-dilutive capital for scale, especially when technology infrastructure modernisation is required. As with PE, the goal is value creation without sacrificing control.
Aligning Incentives for Long-Term Success
Ultimately, management company financing aligns GP and LP interests more tightly. By enabling GPs to increase their own financial commitment without diluting equity, the model boosts confidence and strengthens partnerships. It also reduces dependence on equity sales, supporting long-term business health and succession continuity.
Just as in the property sector—where we enhance value through strategic lease negotiation and reinvestment—PE firms can use intelligent capital structures to build stronger, more resilient businesses.
Supportive policy—paired with proven operational outcomes—is opening the door for more planning consents and pipeline growth across key UK cities.
Conclusion
Management company financing is a sophisticated yet highly practical tool in the modern private equity playbook. It offers private credit investors access to senior, cash flow-backed loans with attractive risk-adjusted returns while giving PE firms the capital flexibility they need to thrive.
Whether financing succession, new fund strategies, or acquisitions, this approach strengthens the foundations of the private equity model itself—just as structured finance tools support long-term asset performance in commercial property.
