Updated Guidance On NAV-Based Facilities For Private Equity Strategies

Net Asset Value (NAV)-based financing facilities ("NAV Facilities") continue to proliferate in private equity. In response, the Institutional Limited Partners Association (ILPA) released comprehensive new guidance making the case for transparency, governance, and risk management to be fundamental considerations in the incurrence and deployment of NAV Facilities. Since the onset of the COVID pandemic, NAV Facilities have gained traction among private equity strategies as a source of liquidity and an additional resource for General Partners ("GPs") to manage indebtedness, support portfolio companies, or make early distributions to Limited Partners ("LPs").

However, this growing reliance on NAV Facilities raises significant concerns for the LP community, particularly in light of limited transparency and explicit governance within many existing Limited Partnership Agreements ("LPAs").