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A team from Reed Smith’s Global Funds Finance Group joined senior industry leaders at the Fund Finance Association Global Leadership Summit in Portugal. The summit brought together senior leaders and stakeholders from across the private funds industry to discuss the key challenges and opportunities facing the market and develop practical solutions to address them.
Unsurprisingly, the theme dominating this year’s summit was the impact that artificial intelligence (AI) will have on the fund finance industry, and the keynote address from David Rowan, founding editor of Wired magazine’s UK edition, provided attendees with leading insight from outside of the industry. Other sessions with chief economists and senior industry figures completed an agenda of thought-provoking discussion.
In this edition of The Glance, we look in more detail at the key themes from the summit and share an update on our fund finance practice and capabilities.
State of the market overview - A GP’s perspective
The “GP Perspectives” panel brought together senior fund finance professionals to discuss the current state of the market. The session covered a range of topics, from the evolving fund finance product landscape and private credit developments to the growing role of AI in portfolio management.
Expanding fund finance toolkit
The fund finance market continues to provide a range of capital solutions for borrowers, with strong lender appetite across products. While subscription lines continue to serve as a baseline for most GPs, the panel highlighted a significant broadening of the financing toolkit, particularly for private credit managers. Products such as NAV lines, asset-backed facilities, mid-market CLO issuance, private placements and bond offerings are increasingly part of the conversation. Structured products, including rated feeder vehicles, were described as powerful capital formation tools, though still nascent and requiring significant time and education to execute. Several panelists emphasized that the growing presence of in-house capital markets teams at sponsors has helped drive much of this innovation.
Rate hedging as a GP priority
Interest rate volatility and its impact on fund-level borrowing costs emerged as a prominent concern. It was observed that hedging, traditionally managed at the portfolio level, is now being given greater emphasis at the fund finance level as well. With borrowing costs approaching thresholds that affect fund economics, GPs expressed a strong desire to lock in rates and explore hedging solutions to protect cash flows and manage additional charges.
Private credit: Redemptions and manager dispersion
The panel addressed recent headlines around redemption pressures in non-traded BDCs and evergreen private credit vehicles. Panelists acknowledged that redemption activity is likely to persist as some investors rotate out of the asset class, but stressed that existing gating mechanisms have functioned as designed and that no vehicles have faced liquidity shortfalls. The consensus was that attention should shift from redemption volumes to underlying asset performance. The growing secondary market for private credit interests was also noted as an area to watch.
AI adoption across fund finance
AI was a unifying topic, with all panelists reporting active engagement. Use cases ranged from portfolio monitoring and dashboard creation to risk reporting optimization and historical data aggregation. Several panelists cautioned that while AI dramatically improves efficiency, governance remains critical – particularly around maintaining analytical rigor in investment materials and ensuring human review of AI-generated outputs.
AI and the future of fund finance
David Rowan, founding editor of Wired magazine’s UK edition, technology investor, and author, delivered an address on how AI and related technologies are poised to reshape the fund finance industry. Rather than framing AI as a threat to existing business models, he urged attendees to view the current moment as a generational opportunity, drawing parallels to the earliest days of the internet and the smartphone.
Three converging trends
Rowan identified three macro-level trends that are converging to create significant new opportunities for the fund finance market:
- The rise of intelligent automation. AI systems are rapidly moving beyond co-pilot functions toward fully autonomous agents capable of executing complex workflows – from document review and compliance validation to portfolio monitoring and risk analysis – at scale and with increasing reliability.
- The physical expansion of AI. Autonomous vehicles, humanoid robots, and sensor-driven industrial systems are creating entirely new asset classes that will require novel financing structures. Rowan highlighted that the humanoid robotics sector alone is projected to rival the global automotive industry in scale within the coming decades.
- Falling barriers to entry. Open-source AI models and low-cost development tools are enabling new market entrants to build sophisticated financial technology platforms that could challenge incumbents.
Implications for fund finance professionals
A central theme of the address was that automation will elevate, not eliminate, human roles in fund finance. Rowan cited the historical example of ATMs, which, contrary to initial fears, led to an increase in bank teller employment as the nature of the role shifted toward higher-value advisory services. He similarly noted that the automation of radiology has increased demand for radiologists rather than displacing them. These patterns illustrate Jevons’ Paradox: efficiency gains tend to generate increased demand rather than reduced headcount.
For fund finance professionals, Rowan suggested the practical implication is a reorientation of roles – away from repetitive analytical tasks and toward relationship management, strategic judgment, and deal structuring. He envisioned a near-term future featuring continuously verified NAV facilities, real-time auditability, and dynamically priced financing structures.
Looking ahead
Rowan concluded by urging an entrepreneurial mindset, emphasizing that adaptability, cross-sector curiosity, and a willingness to experiment with emerging tools will be essential to capturing the opportunities ahead. The pace of technological change is accelerating, and those who engage proactively stand to benefit most.
The economic outlook
The 2026 Global Leadership Summit featured a panel of chief economists from leading financial institutions who assessed the macro outlook across Europe, the UK, and the United States. The discussion touched on energy market pressures, the evolving role of AI in global growth, bond market dynamics, and the shifting geopolitical landscape.
European resilience amid structural headwinds
A dominant theme was the surprising resilience of the European economy. Despite elevated energy costs – with natural gas prices having tripled from earlier benchmarks – ongoing trade frictions, and intensifying competition from China, growth across the Eurozone has held up better than many forecasters had anticipated. Panelists attributed this to several factors: labor market reforms implemented since the sovereign debt crisis, Germany’s historic loosening of its fiscal stance, and the early stages of AI adoption filtering through European businesses. However, panelists cautioned that the competitive threat from China – particularly in advanced manufacturing and electric vehicles – remains a long-term strategic challenge, and European policymakers have yet to coalesce around a unified industrial response.
The UK at a crossroads
Discussion of the UK centered on the new government’s fiscal constraints and growth opportunities. While recent GDP readings have been encouraging, panelists emphasized the limited fiscal headroom ahead of the upcoming budget and noted that global bond market conditions would constrain spending ambitions. Planning reform and the UK’s relative strength in AI research and life sciences were cited as areas of opportunity, alongside devolution and public-private partnerships as potential models for investment-led growth.
U.S. growth: AI-powered but uneven
The U.S. economy has surged on the AI-driven capital expenditure boom, which panelists estimated contributed meaningfully to GDP growth. Equity market wealth effects have sustained consumer spending even as real wage growth has slowed, creating a potentially fragile dynamic. Corporate margins remain elevated, a factor that could perpetuate inflationary pressures and complicate the Federal Reserve’s policy path under its new leadership.
Bond markets and fiscal sustainability
The global bond sell-off featured prominently, with panelists noting that rising yields reflect more than just monetary policy repricing. Fiscal credibility concerns, growing sovereign issuance, and the emergence of highly rated corporate borrowers competing for capital – particularly to fund AI infrastructure – are reshaping fixed-income dynamics.
Reasons for optimism
Despite the headwinds, the outlook is broadly constructive in tone. The global investment cycle, driven by AI and energy transition, represents a structural shift that could underpin medium-term growth. The resilience demonstrated by advanced economies through successive crises was seen as evidence of greater adaptability, offering a more encouraging backdrop than headline risks alone would suggest.
Reed Smith’s fund finance team
Our platinum sponsorship of the summit underscores our continued commitment to being at the forefront of the fund finance conversation, not only through the work we do on transactions but also through active engagement with the institutions, investors, and intermediaries driving this market forward.
A global platform built for a converging market
Our capabilities do not stop at the traditional boundaries of fund finance. As the market penetrates the entire capital structure and converges with other financing verticals such as structured notes, CLOs, back leverage, continuation financing, and traditional asset-level lending, our team brings depth across each of those disciplines.
Our CLO and specialty finance practitioners exemplify this integrated approach, bringing deep structuring knowledge across CLO transactions, warehouse facilities, and retention fund structures that intersect directly with the evolving fund finance products.
Across the wider team, we advise clients on a range of different debt solutions throughout the capital structure, from subscription line, NAV, and hybrid facilities to Holdco and asset-level financings. We act for both lenders and borrowers across the industry, from international banks to private equity and private credit funds.
Our financial regulatory specialists are trusted advisers to the wholesale financial markets, known for translating complex regulation into commercial outcomes. They guide banks, brokers, trading venues, clearinghouses, central securities depositories, payment and settlement systems, global custodians, and asset managers through mission-critical regulatory, transactional, and strategic mandates.
A truly transatlantic team
What sets our platform apart is how closely our U.S. and European lawyers work together in practice – not just on paper, but on deals, at conferences, and in the advice we give every day. Our European team of partners, counsel, and associates sits alongside a strong U.S. contingent based across multiple offices. That joined-up approach means clients benefit from a genuinely global perspective, informed by the most active markets, without sacrificing the local knowledge and consistency that complex transactions demand.
Technology at the core of our delivery
Our commitment to this market extends beyond knowledge and relationships – it includes a deliberate investment in how we execute. We have embedded AI and technology into our fund finance workflows to drive efficiency and consistency across transactions. On the due diligence side, our AI-powered tools go beyond surface-level review, identifying nuanced risks in fund documentation that might otherwise be missed until later in the transaction cycle. When it comes to negotiations, these tools give our lawyers faster and more precise access to the firm’s collective fund finance experience, so that the advice our clients receive reflects not just the individual deal but the full weight of our market knowledge. None of this replaces the fundamentals – the market understanding, the trusted relationships, and the rigorous quality of work product that clients have come to expect from us – but it does sharpen each of those strengths considerably.
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