Net Asset Value Loans | Flexible Liquidity Solutions for Private Funds

What Are Net Asset Value Loans?

Net Asset Value Loans, often referred to as NAV loans, are a sophisticated form of fund-level financing that allows private equity funds, hedge funds, and other investment vehicles to borrow against the value of their underlying portfolio holdings.

Instead of relying on investor commitments or a single asset, these loans are secured by the fund’s overall net asset value — the total value of its investments minus any liabilities.

In simple terms, a NAV loan enables a fund to unlock liquidity from its existing assets without selling them. This creates a flexible source of capital that can be used for distributions, follow-on investments, redemptions, or even general partner (GP) commitments.

Who Uses NAV Loans?

NAV loans are typically used by institutional investors and fund managers, including:

• Private equity funds seeking liquidity between exits

• Hedge funds requiring portfolio-level leverage

• Family offices managing diversified investments

• Secondary funds looking to optimise returns or manage distributions

These borrowers leverage NAV loans to enhance portfolio performance while maintaining long-term investment positions.

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How Net Asset Value Loans Work

Assessing the Fund’s Portfolio Value

The first step involves assessing the fund’s portfolio value. Lenders evaluate the quality, diversification, and liquidity of the underlying assets to calculate a reliable NAV. Advance rates are then applied, often ranging from 20% to 50% of the fund’s total NAV, depending on risk profile and concentration levels.

Loan Structure and Terms

A NAV loan can be structured as a term facility or a revolving credit line. Facilities are typically non-recourse or limited recourse, meaning the lender’s claim is restricted to the assets of the fund rather than the personal liability of the general partner.
Interest rates vary based on portfolio composition and leverage level, usually sitting between traditional bank lending and unsecured credit pricing.

Repayment Mechanisms

Funds generally repay NAV loans from future cash flows — such as portfolio distributions, dividends, asset disposals, or realised gains. This makes them ideal for funds nearing maturity or those managing liquidity across multiple investment timelines.

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Key Benefits of Net Asset Value Loans

Unlock Liquidity Without Selling Assets

NAV loans give fund managers the ability to access capital without prematurely exiting investments. In periods when IPOs or M&A markets slow down, this structure helps maintain portfolio integrity while still meeting cash flow needs.

Fund-Level Flexibility

NAV loans are one of the most adaptable liquidity tools available. They can be used for:

• Bridging delayed exits or capital calls

• Supporting follow-on investments in performing portfolio companies

• Meeting redemption requests or investor distributions

• Financing GP commitments or management company needs

Enhancing Fund Returns and IRR Management

By recycling capital through NAV financing, fund managers can improve internal rate of return (IRR) metrics and enhance distributions to limited partners (LPs). This strategic use of leverage allows funds to generate incremental returns without raising new equity or selling positions too early.

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When to Use a Net Asset Value Loan

Late-Stage Funds Seeking Liquidity

NAV loans are particularly useful for funds approaching the end of their lifecycle. Instead of liquidating assets under pressure, managers can borrow against the portfolio to provide liquidity for investors while continuing to manage value creation.

Bridging Delayed Exits or Capital Calls

In volatile markets, exit timelines often extend. NAV loans act as a bridge, enabling the fund to maintain operational momentum and avoid forced divestments.

Portfolio Rebalancing and Secondary Opportunities

Funds can also use NAV-based financing to reweight exposure, acquire secondary stakes, or reposition holdings — taking advantage of market dislocations without needing new investor commitments.

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Typical Loan-to-Value (LTV) Ratios and Collateral Requirements

Advance Rates Explained

Lenders determine an advance rate based on the quality and diversification of the underlying portfolio. For most private equity funds, LTV ratios typically range between 20% and 50% of NAV.
More diversified, lower-risk portfolios qualify for higher leverage, while concentrated or illiquid holdings receive more conservative treatment.

Types of Acceptable Collateral

Acceptable collateral for NAV loans can include:

• Equity interests in portfolio companies

• Limited partnership interests

• Fund-of-funds holdings

• Secondary or continuation fund assets

Valuation and Monitoring Practices

Ongoing monitoring ensures that portfolio valuations remain accurate. Lenders may require regular reporting, third-party valuations, or stress tests to manage downside exposure. If the NAV declines significantly, lenders can adjust covenants or request partial repayments to maintain balance.

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Comparing Net Asset Value Loans vs. Subscription Line Facilities

Collateral Differences

While both are forms of fund finance, subscription lines are secured by uncalled investor commitments (LP capital), whereas NAV loans are backed by the fund’s existing portfolio assets. This makes NAV loans a more relevant tool for mature funds.

Timing Within the Fund Lifecycle

Subscription lines are used early in a fund’s life to bridge capital calls. NAV loans, on the other hand, are most effective in later stages when portfolio value has been realised but liquidity is not yet available.

Cost, Risk, and Strategic Use

Subscription facilities are cheaper but limited in scope. NAV loans carry slightly higher pricing but offer broader flexibility and are often the only viable liquidity option once the commitment period has ended.

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Risks and Considerations

Valuation Volatility and Market Sensitivity

If portfolio valuations decline, the NAV that underpins the loan can fall below covenant thresholds, leading to margin calls or reduced borrowing capacity.

Leverage Risk and Investor Perception

Although NAV loans are increasingly common, excessive fund-level leverage can raise investor concerns. Transparency and proper structuring are key to maintaining LP confidence.

Lender Due Diligence and Structural Protections

Lenders conduct detailed due diligence on fund structure, asset quality, and historical performance. Borrowers should expect covenants related to NAV coverage, reporting frequency, and concentration limits.

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The Growing Market for NAV Loans

Institutional Adoption Trends

NAV-based lending has moved from niche to mainstream as private capital markets mature. Many large global private equity and hedge funds now use NAV loans as part of their liquidity management toolkit.

Macroeconomic Factors Driving Growth

Rising interest rates, slower exit markets, and extended fund lifecycles have accelerated demand for NAV financing. Rather than relying solely on capital calls, fund managers can now maintain flexibility through structured leverage.

Emerging Structures and Hybrid Facilities

Recent innovations include hybrid NAV facilities, which combine features of subscription lines and NAV loans. Some funds also use preferred equity structures to complement NAV-based debt — creating a layered, efficient liquidity solution.

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How Platinum Global Bridging Finance Supports Fund-Level Borrowers

Tailored NAV Loan Solutions

At Platinum Global Bridging Finance, we help fund managers and institutional investors structure bespoke NAV financing solutions that align with their fund strategy and liquidity needs. As an independent broker, we source competitive offers from a network of global lenders specialising in fund-level facilities.

Expertise in Alternative Collateral and Cross-Border Funds

Our experience extends beyond traditional assets — including complex portfolios, secondary funds, and cross-border vehicles. We understand how to negotiate advance rates, reduce borrowing costs, and ensure facility terms protect both the fund and its investors.

Get in Touch for a Confidential Assessment

Whether you manage a private equity fund nearing maturity or a hedge fund seeking short-term liquidity, Platinum Global Bridging Finance can arrange the right structure to meet your objectives.
Contact us today for a confidential discussion on how a Net Asset Value Loan can help you unlock capital efficiently while maintaining long-term investment value.

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Frequently Asked Questions: Net Asset Value Loans

1. What is a Net Asset Value Loan?
A Net Asset Value Loan is a type of financing that allows private equity, venture capital, and hedge funds to borrow against the underlying value of their portfolio holdings. It provides liquidity without requiring the sale of portfolio assets.

2. How does a NAV Loan differ from a traditional fund financing facility?
Unlike subscription lines secured by uncalled capital commitments, NAV Loans are secured by the fund’s invested portfolio. They are typically used later in a fund’s lifecycle to unlock value from existing assets.

3. Who uses Net Asset Value Loans?
NAV Loans are mainly used by private equity funds, fund-of-funds, hedge funds, and family offices seeking liquidity for portfolio rebalancing, investor distributions, or new investment opportunities.

4. What can Net Asset Value Loan proceeds be used for?
Funds often use NAV Loan proceeds to make follow-on investments, fund distributions to investors, support portfolio company working capital, or bridge liquidity ahead of exits or realizations.

5. How is the loan amount determined?
The loan size is generally based on a percentage of the fund’s net asset value, with advance rates typically ranging from 10% to 30% depending on portfolio diversification, asset quality, and lender criteria.

6. Are NAV Loans recourse or non-recourse?
Most NAV-based facilities are non-recourse, meaning repayment is limited to the value of the pledged portfolio. However, specific structures may vary depending on the lender and the borrower’s needs.

7. What types of assets can be used as collateral for a NAV Loan?
Eligible collateral typically includes equity stakes in portfolio companies, fund interests, and in some cases, publicly traded securities held within a fund’s structure.

8. How long does it take to arrange a NAV Loan?
Depending on complexity, due diligence, and structure, a NAV Loan can usually be arranged within four to six weeks, with experienced brokers like Platinum Global Bridging Finance expediting the process.

9. What are the benefits of using NAV-based financing?
NAV-based financing allows fund managers to maintain investment flexibility, avoid forced asset sales, enhance portfolio IRR, and manage liquidity more strategically across the fund’s lifecycle.

10. How can Platinum Global Bridging Finance assist with NAV Loans?
Platinum Global Bridging Finance works with specialist lenders offering NAV-based credit facilities to private equity and hedge funds. We structure bespoke solutions tailored to fund objectives, collateral composition, and liquidity requirements.

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Conclusion

Net Asset Value Loans have become a vital liquidity tool for institutional investors navigating today’s complex markets. By leveraging the intrinsic value of their portfolios, funds can gain the flexibility to manage distributions, pursue new opportunities, and enhance investor returns — all without liquidating valuable holdings.

Platinum Global Bridging Finance specialises in structuring tailored NAV loan solutions that connect clients with leading fund finance lenders worldwide. If your fund requires a strategic liquidity option, our team can help arrange a facility designed around your goals and portfolio profile.