Fund Finance

Unique access to emerging value opportunities

Driven by the exponential growth of private market funds, a scalable investment opportunity has developed for fund finance. Fund finance to date has been largely dominated by bank financing but institutional investors are increasingly discovering relative value opportunities.

What is Fund Finance?

 
The market for NAV finance is estimated at around USD 100 billion and growing rapidly. In this video, Bas Kragten, Head of Private ABS & Infrastructure, introduces Fund Finance, focusing on Capital Call Financing and NAV Financing - the two market segments we are active in. Bas discusses where the premium over liquids comes from but also what the main risks are in relation to this type of financing.

We distinguish two main types of fund finance:

 

 

1. Capital Call Finance

  • Loan with recourse to the fund investors (Limited Partners)

  • Diverse pool of LPs consisting of pension funds, insurance companies and endowments

 

 

2. NAV Finance

  • Loan with recourse to the fund’s investments

  • Low LTV loans:
    • 10– 20% (single fund)
    • 30 - 50% (secondaries)
Why invest?

 

1) Superior risk-adjusted returns with IG risk profile
  • Spreads on Capital Call and NAV Finance facilities range between 175 to 225 bps and 380 bps over European government bonds respectively
2) Portfolio diversification to alternative risk drivers
  • Exposure to alternative risk drivers tied to private equity commitments
  • Low correlation with public market movements
Why Aegon AM for Fund Finance?

Fund Finance is a core capability of Aegon Asset Management

Resources and track record
  • Global investment team across Europe and the US. 
  • Over €3 billion in Fund Finance investments since 2018
  • Over €700 million in committed capital. 
  • Over €1 billion raised in seed capital 
  • No credit migration to date. 
Sourcing and alignment
  • Co-investing next to Transamerica and ASR
  • Co-investments alongside key lenders
Product range
  • Capital call and NAV Finance
  • Tailored to institutional investors
  • Investment Grade risk profile
  • Focus on PE buy-out funds
  • Strategic sourcing network through global lending banks  
Introduction to Capital Call Finance

Capital call facilities have become an important financing tool for private equity funds. These credit facilities enable fund managers to bridge capital needs before calling down fund commitments from Limited Partners (LPs). Given these attractive features, the asset class has been gaining traction with institutional investors in recent years.

Find out more
Overview of our key Fund Finance strategies

At Aegon Asset Management we offer two distinct Fund Finance strategies, each at different stages of the PE fund’s life cycle. Past performance does not predict future returns.

 

 

Capital Call Financing

NAV Finance

Target Return

3m Euribor + 200

250 bps

3m Euribor + 400

500bps (up to 9% yield)

Credit quality

AA / A

A / BBB

Weighted average life

Drawn maturities: 3

12 months

Expected WAL: 3

5 years

Target Structure

  • Co investment structures with specialized banks offering access to deal pipeline.

  • Loan by loan underwriting while benefiting from strong ‘alignment of interest’ with bank lenders.

  • Drawn facilities.

  • Co investment structures with specialized banks offering access to deal pipeline.

  • Loan by loan underwriting while benefiting from strong ‘alignment of interest’ with bank lenders.

  • Term Loan facilities.

Loan Purpose

Working capital to prefund LP commitment drawings

Add on acquisitions (PE Funds) in harvesting phase & Limited Partner distributions

Source: Aegon AM. As at March 2024.