Assessing Lender Risk In Fund Finance Markets (GLI Chapters)

Lawyers from Jersey and the Cayman Islands have contributed to Global Legal Insight's 2019 guide to assessing lender risk in fund finance markets.

A zero-risk product?

Despite being a relatively long-standing lending product, until very recently there had been no public payment defaults by funds in the fund finance space, and consequently, no test cases to discuss or examine. As a result, the market has legitimately considered this to be a safe product for lenders, and encouraged more market participants to dip their toe, or even to jump feet first, into the water.

The complexity and cross-jurisdictional dimensions of many fund structures, coupled with the size of the financial transactions and their relatively slim margins, mean that lenders need to be more alert than ever to their possible exposure. This applies equally to new entrants and established players. Risks can be exacerbated by the lender having no direct contractual nexus with fund investors (who