PE shops of all sizes are increasingly borrowing against portfolio values to fund acquisitions, continuation vehicles and firm expansion. The strategy’s rise marks a dramatic reversal for a financing product that only a few years ago was viewed by many investors as a sign of distress.
Once viewed skeptically by investors and largely associated with sponsors struggling to exit portfolio companies, NAV loans are increasingly being used by healthy firms to fund acquisitions, support portfolio companies, bridge liquidity gaps and finance strategic initiatives without selling assets at discounted valuations.
Hunter Point Capital and 17Capital each recently closed funds, the clearest signal yet that NAV-based financing has shed its reputation as a last resort for sponsors struggling to exit and become a standard tool even healthy firms reach for.
Earlier this year, NAV lending pioneer 17Capital closed its second dedicated credit fund at approximately $7.5 billion, the largest NAV-loan fundraising to date, according to the firm. The vehicle will provide fund-level loans to private equity managers across North America and Europe. 17Capital said the fund ranks among the largest private credit vehicles raised globally over the past year.
Founded in 2008, the firm helped transform fund-level financing from an occasional solution to a liquidity crisis into a dedicated asset class, developing structures that are now widely used across the private equity industry.
17Capital’s Strategic Lending program — a separate $5.5 billion vehicle that closed last July — is built specifically to fund GP commitments, finance franchise growth and consolidation, and support succession planning, not to rescue distressed funds.
“NAV finance is now firmly established as a standalone asset class within private credit,” says 17Capital Partner Fokke Lucas. “U.S. investors are now viewing NAV finance as a compelling alternative within an otherwise crowded private credit market.”
The shift also marks a pivot for Hunter Point itself. The firm, founded in 2020 by Bennett Goodman and Avshalom Kalichstein, built its name by buying minority stakes in alternative asset managers. Its first GP-stakes fund closed at $3.3 billion in 2024, backing firms including Pretium Partners, Coller Capital, L Catterton, The Vistria Group and MidOcean Partners.
Hunter Point’s $4.3 billion NAV lending fund is its first move into direct fund financing rather than GP equity, a bet that the firms it doesn’t own a piece of will still pay for its balance sheet.
“We see rising demand for flexible financing solutions throughout private markets, says Kalichstein.
Crestline Investors Inc., which closed its third NAV financing fund on $1.7 billion, recently launched an evergreen fund to target the high-net-worth investors and RIA channel.
“This will continue to be a point of focus in this next phase of growth,” says Tom Bavin, Co-Head of Crestline’s Client Partnership Group.
Unlike traditional portfolio-company debt, NAV loans are secured by the value of an entire fund’s underlying investments. Because they are typically written at relatively conservative loan-to-value ratios, lenders gain diversification across multiple assets while sponsors obtain flexible capital without selling companies prematurely.
Supporters argue the financing can create value when used to fund add-on acquisitions, support growth initiatives or provide capital for continuation vehicles. Critics, however, worry that some firms use the loans simply to accelerate distributions to investors, potentially masking weak exit activity while adding leverage at the fund level.
Some LPs are pushing for clearer disclosures about how NAV facilities are used. They want to distinguish financing that genuinely supports a portfolio company’s growth from leverage taken on solely to accelerate a distribution and flatten a fund’s DPI numbers ahead of a new raise.
The concern is that a NAV loan used to pay out LPs and a NAV loan used to fund an add-on acquisition can look identical on a capital structure chart while serving very different masters.
ILPA, the trade group representing investors in the asset class, still has concerns about these vehicles. GPs have been taking on NAV facilities without engaging or notifying LPs or LPACs, it says.
ILPA recommends GPs seek LPAC consent before taking a NAV loan, regardless of the use of proceeds.
Those concerns have not slowed adoption.
Market participants estimate the NAV lending market has already surpassed $100 billion and could expand significantly in the coming years as more sponsors seek alternative liquidity solutions.
