Olympia Shabangu | Director at Turning Point Capital
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In the face of intensifying macroeconomic volatility, private equity (PE) managers are embracing new financing solutions to sustain momentum and preserve value. One such solution — Net Asset Value (NAV) finance — is gaining prominence for its flexibility and scalability, particularly during uncertain economic cycles.
As a legal graduate turned capital markets expert, I’ve seen firsthand how alternative finance is evolving. The demand for NAV financing continues to grow, with managers seeking to avoid the pitfalls experienced during previous downturns — notably the Global Financial Crisis (GFC), where forced asset sales and extended holding periods significantly damaged fund performance.
A Perfect Storm for Innovation
With inflation at four-decade highs and interest rates showing little sign of retreat, the global investment environment remains fragile. Add to that ongoing geopolitical risks, supply chain instability, and recent tremors in the global banking system, and the need for creative liquidity solutions becomes even more pressing.
Amid this turbulence, private equity managers are turning toward NAV-based facilities as a reliable alternative to traditional leverage or exits. This marks a shift in mentality: from reactive portfolio management to proactive capital optimisation.
“We’re not seeing distress, but rather a strategic repositioning,” says Jafar Hamid, a seasoned wealth manager with experience at HSBC, UBS, and JP Morgan. “Clients want long-term asset exposure without sacrificing liquidity or control. NAV finance enables that balance.”
Learning from the Past, Planning for the Future
The GFC left lasting scars on fund managers who had to liquidate assets prematurely, often at discounted valuations. Fast forward to today, and many are taking a more deliberate approach.
Rather than divest, managers are holding outperforming assets longer. But with a tightening debt market and increased scrutiny on portfolio leverage, dividend recapitalisations — once a go-to option — are less viable. This has created fertile ground for fund-level NAV financing.
NAV facilities provide managers with non-dilutive, flexible capital backed by the value of existing fund assets. Unlike subscription credit lines (which are limited to investor commitments), NAV finance taps into the underlying equity of mature portfolios. This allows managers to deploy capital for follow-on investments, cover delayed exits, or enhance portfolio companies without raising new equity or calling limited partner (LP) capital.
A New Normal for Private Equity
NAV finance also aligns with two emerging trends: the rise of continuation vehicles and the surge in bolt-on acquisitions. According to EY, 60% of PE deals in 2022 were bolt-ons — a strategy that benefits from incremental capital injections into proven winners.
Continuation funds and NAV finance both empower general partners (GPs) to maximise value over a longer horizon without immediate exits. As more firms become familiar with these tools, adoption is accelerating.
For GPs navigating the current cycle, this expanded toolkit mitigates the need for fire sales or performance compromise. And for LPs, the outcome is equally attractive: steady returns, reduced volatility, and stronger alignment with fund managers.
Capital Resilience in a Crowded Market
The race for capital is tightening. With a saturated fundraising environment, investors are favouring managers with resilient, adaptive strategies. Demonstrating innovation in liquidity and fund management — such as via NAV finance — can provide a competitive edge.
NAV lenders are now offering increasingly tailored solutions to managers of all sizes. These facilities, structured with senior claims on cash flows, are designed to self-liquidate over time and minimise repayment risk. For investors in these strategies, returns are often comparable to mezzanine debt, with the added security of diversified asset exposure.
At Amicorp Capital, we’re seeing increased interest from mid-market managers exploring NAV finance to bridge fundraising gaps, pursue opportunistic acquisitions, or facilitate internal succession.
Optionality as a Competitive Advantage
As Alvin Toffler once warned, too much choice can paralyse decision-making. But in the case of private equity, a broader suite of financing options may be just what’s needed to weather the current macro headwinds.
NAV finance, alongside tools like continuation vehicles and structured secondaries, represents a new era of fund-level strategy. For managers confident in their portfolio’s intrinsic value and long-term growth potential, these solutions offer flexibility without compromise.
In a volatile world, adaptability is the real alpha.
