ILPA Guidance On NAV Facilities

On 25 July 2024, the Institutional Limited Partners Association ("ILPA") published guidance (the "Guidance") on the use of net asset value ("NAV") facilities. The Guidance specifically applies to private equity funds and does not address the use of NAV facilities in other strategies, such as secondaries, private credit or real estate.

NAV facilities are debt facilities backed by the value of a fund's underlying assets, commonly used when most of a fund's commitments have been drawn from investors. As ILPA notes in the Guidance, there are various use cases for NAV facilities, including generating defensive capital to protect portfolio value, financing value creation opportunities such as add-ons and making distributions to investors. Structurally, the borrower of a NAV facility may be the fund or a special purpose vehicle ("SPV") sitting directly or indirectly below the fund. The collateral package almost always includes security over the fund's accounts into