A Brief Overview of Fund Financing

A graduate of the Northwestern University School of Law, attorney Zac Barnett co-founded Fund Finance Partners, LLC, in 2019. Focused on helping fund sponsors obtain the best terms on all types of financing, Zac Barnett draws on nearly two decades of experience as an attorney in the fund finance sector.

Fund financing facilities are loans provided to private market funds such as private equity, credit, infrastructure, or real estate. These facilities may be beneficial to fund managers as they provide capital to finance investment activity within a few days, rather than requiring managers to draw capital from investors. Additionally, fund financing can bridge gaps in the timing of cash flows and refinance more expensive debt.

Parties who utilize fund financing include private equity sponsors, investment funds, and portfolio companies, while lenders include traditional brick-and-mortar banks, investment banks, and private credit funds. Fund financing generally falls into one of two categories. Subscription line financing is secured against a fund’s investors’ commitments and is used early in the fund’s lifecycle. Alternatively, NAV-backed financing relies on a portfolio of underlying assets and private market funds and usually occurs later in the fund’s lifecycle.