Private fund preferred equity and NAV financing opportunities and risks

Sovereign investors in private funds will be hearing increasingly of preferred equity and NAV financing, especially as a response to the market slowdown caused by the COVID-19 pandemic.

In this Sovereign Investor Insights article, we look at what this alternative financing trend involves and why it is happening, and we examine some of the issues relevant to sovereign investors considering these opportunities.

A variety of approaches exist and not all will have been tested through a full market cycle. It is, therefore, important to consider new opportunities carefully, understanding rewards and risks from first principles and looking for parallels from outside the private funds industry for guidance.

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