Introduction

The Loan Market Association (LMA) Fund Finance 2026 Conference brought the European fund finance community together in London, and the agenda did not disappoint. Against a backdrop of shifting geopolitics, evolving regulation and a market that continues to mature at pace, the conversations on stage offered both a candid assessment of where we are today and a thoughtful look at where the industry is heading next. The senior members of the Reed Smith Fund Finance team attended and captured the key themes, debates and takeaways from each session. Their summaries appear below.

As the conference was conducted under the Chatham House Rule, we have deliberately kept the summaries that follow at a high level, providing broad themes and takeaways without attribution or granular detail. We hope the summary serves as a useful point of reference as you take stock of the issues likely to dominate the year ahead.

It was also a real pleasure to welcome so many of you to our sponsor stand. Our power banks proved a popular giveaway – a small but, we hope, practical reminder of Reed Smith as you keep your devices (and deals) charged through the year. Thank you to everyone who stopped by for a conversation; it was good to reconnect with familiar faces and to meet new ones.

Our thanks to the LMA and to all those who joined us in London. The conference may be over, but the deals, of course, do not pause, and we look forward to working with many of you in the months ahead and to seeing you at the next event.

Leon Stephenson – Chair of the Global Fund Finance Group

Keynote: Politics, power and the global business landscape

Author: Maccailein Campbell

The opening session of the day offered a wide-ranging tour d'horizon of the geopolitical forces reshaping the global investment landscape. Themes covered included the current state of US–China relations, the durability of US hegemony, security dynamics in the Middle East and the potential repercussions of the ongoing conflict in the region, together with reflections on the prospects for a Russia–Ukraine ceasefire.

For Fund Finance clients, the broader implication is the impact on lending and investment conditions arising from shifting certainty and changing market dynamics, including jurisdictional and currency pulls as countries, markets and territories continue to reposition themselves.

Fund Finance Intelligence Survey: Unpacking key trends in EMEA

Author: Nicholas Williams

The opening session followed a presentation of The Drawdown's Fund Finance Intelligence Survey, produced in association with the LMA, and brought together a panel of senior market participants to discuss the key trends shaping the EMEA fund finance market.

The survey confirmed continued broadening of the EMEA fund finance market, with a greater number of active lenders, increased product flexibility and clear growth in new money transactions. A significant majority of lenders reported new money transactions in 2025, while a substantial proportion of borrowers anticipated increasing their net asset value (NAV) facility volumes in 2026, and a meaningful minority expected growth in general partner (GP)-level financing over the same period. Subscription lines remain dominant, but the rising expectations around NAV and GP facilities reflect the wider optionality now available to borrowers.

The panel agreed that fund finance growth is structural rather than cyclical, with financing increasingly embedded in portfolio planning from inception. While delayed exits continue to drive NAV lending demand, the more significant development has been the emergence of new products that use fund finance as a fundraising tool rather than merely a liquidity mechanism. GPs are building financing architecture across asset classes and fund stages, and partnerships between banks and alternative capital providers are creating scalability. Documentation continues to evolve to contemplate a wider range of financing scenarios and portfolio management needs.

Notwithstanding that competition was identified by the majority of lenders as a key challenge, the panel was reassured that market discipline is holding. Loan-to-value (LTV) levels for buyout NAV facilities remain conservative, with the vast majority below 20%, and competitive pressure is manifesting principally in pricing compression rather than any deterioration in deal terms. The flexibility entering documentation was characterized as a "managed creep" tailored to specific structures, rather than a wholesale erosion of terms. Macroeconomic volatility – described as the most acute the market has felt since COVID – is complicating execution, and GPs continue to prioritize reliability and certainty of execution over marginal pricing advantages.

The panel noted a discernible shift in limited partner (LP) concerns: the question is no longer: why are you using leverage? but, how and why are you using it? LPs are seeking discipline, alignment and transparency, with a growing emphasis on the ability to strip out leverage effects when comparing performance across managers. Education and transparency were identified as the common threads running through the wider fund finance conversation.

The panel concluded on an optimistic note, identifying key opportunities in the competitive advantage available to general partners (GPs) who integrate financing into their strategy from the outset; the maturation of bank and alternative capital partnerships; and the growing sophistication of sponsors in optimizing across different pools of capital to support better governance and larger deal sizes.

In conversation: Regulatory considerations around private markets

Author: Angela Hagerman

This one-on-one conversation explored the evolving regulatory landscape surrounding private markets, drawing on a transatlantic perspective informed by senior experience at both the Financial Conduct Authority (FCA) and the U.S. Securities and Exchange Commission (SEC), as well as in chief risk roles at major buy-side firms. The discussion touched on supervisory philosophy, systemic risk, valuation practices and investor protection at a time of significant growth in private assets.

The session opened with a contrast between the regulatory philosophies of the SEC and the FCA. The SEC’s approach was characterized as more arms-length, on the basis that distance preserves regulatory authority. The FCA, by contrast, takes a more hands-on posture, the view being that closer relationships with regulated firms allow regulators to be more influential and ultimately more effective.

Given the growth of alternatives, it was noted that the FCA recently conducted a multi-firm review of valuation practices to ensure that the right systems and governance are in place. This year, the authority is undertaking a review of conflicts of interest and intends to publish a report for the industry on best practices Good valuation practice was described as being prepared for markets to change, understanding the full spectrum of outcomes in stressed scenarios and having a clear framework for when firms would move away from model-based marks to current market valuations.

The discussion then turned to the tension surrounding illiquidity. Investors need to understand that they will not get their money back any time soon, and clear disclosure on this point is essential. Private credit was characterized as broadly positive for the financial system because it diffuses credit shocks; however, it does not diffuse liquidity shocks, precisely because the asset class is illiquid. It is, on the other hand, typically less levered than bank debt. In the retirement context, defined benefit and defined contribution plan assets are considered well positioned for private credit, given that those pools are intended to be outstanding for the long term, although in the United States participants tend to cash out plans more frequently.

Investor education was highlighted as a particular area of focus, with the observation that most people know more about fixing a car than they do about how investments work. The case was made for plain language, on the basis that terms such as ‘loss’ resonate more clearly with retail investors than abstractions such as ‘volatility’.

In terms of key takeaways, first, regulatory engagement matters: a hands-on supervisory model can foster stronger compliance cultures and more meaningful dialogue between regulators and market participants. Second, valuation governance and conflicts of interest remain a high priority for the FCA, and firms should expect heightened scrutiny and forthcoming industry guidance. Third, as private markets expand toward retail channels, clear disclosure of illiquidity risks and genuine investor education are essential safeguards that the industry must embrace proactively.

LP perspectives: Transparency, engagement and liquidity

Author: Helen Penwill

The central message of this session was that, as fund finance grows in complexity, LPs require greater transparency, earlier engagement and more standardized reporting from their GPs.

A dominant theme was the risk of distributing private market products to retail investors through evergreen and similar structures, and the need to acknowledge the differing levels of investor sophistication. No matter how carefully investors are educated about gating upfront, the reality may only crystallize when gates are invoked and capital is inaccessible. Education alone is therefore insufficient: product design and governance must account for the behavioural responses of less sophisticated investors in stressed markets.

The discussion turned to continuation vehicles and fund-level leverage, both of which present a learning curve for LPs as they get to grips with fund finance mechanics. Limited partnership agreement (LPA) provisions can be generic, even as leverage has expanded from capital call facilities to NAV lines, and fund-level debt can put the entire fund at risk depending on how cross-collateralization operates, potentially undermining LP diversification expectations. A simple metric, such as loan-to-value, carries layers of complexity – it is not just about the ratio but also about the volatility of the NAV itself.

The session also examined whether improved disclosure frameworks are translating into genuine LP understanding. There has been progress since the development of the Institutional Limited Partnership Association (ILPA) guidelines, but disclosures could be more standardized, particularly regarding fees. The Limited Partnership Advisory Committee (LPAC) was identified as a potentially powerful governance tool when it operates beyond checkbox compliance. The LPAC is not, however, a one-size-fits-all solution, and LPs outside the LPAC can feel excluded from information flows.

It was noted that investor relations teams should not function in a vacuum, and that fund finance specialists should not be left to communicate complex financing matters alone: lawyers and portfolio managers should also be involved. GPs who adopt this approach and proactively address leverage tend to build greater investor confidence as a result.

The panel closed with three thoughts: first, the importance of engaging now, and not waiting until a crisis occurs; second, encouraging GPs to develop standardized reporting that includes leverage line items; and third, encouraging LPs to remain curious and to ask questions about and to the funds in which they are invested.

Spotlight: Institutional capital – evolving structures, challenges and opportunities

Author: Helen Penwill

This session explored the rapidly evolving role of institutional capital in fund finance, one of the most significant structural shifts the market has experienced over the past decade.

Institutional participation in fund finance now extends well beyond insurance companies to encompass pension funds, reinsurance companies and smaller banks that do not participate independently. The asset class offers attractive relative value at very low duration, functioning as an effective cash replacement for pension fund clients, while favorable solvency capital treatment makes it particularly appealing to insurers. Audience polling confirmed expectations of increased institutional activity ahead, with growing interest in structured products alongside continued demand in subscription line financing.

A recurring theme was the importance of structural innovation to accommodate diverse regulatory frameworks, with shifts toward bond-like structures, prepayment protections and standardized ratings designed to meet matching adjustment requirements for UK insurers and solvency capital considerations for European investors.

The general consensus was that there is no material reduction in institutional demand for fund finance. While investors are applying greater scrutiny – particularly to higher-risk segments of private credit – the short-duration and high-quality characteristics of fund finance position it favorably as a potential beneficiary of any flight to quality.

Key priorities for further market development include greater transparency in structuring; standardization of features to improve comparability; and the continued education of both investors and GPs.

Innovations in liquidity: Tools for a shifting market

Author: Yannis Potamias

The session highlighted how liquidity management has evolved from a reactive response to market stress into a core strategic capability in private markets. While constrained exits, slow fundraising and reduced distributions have accelerated this shift, liquidity solutions are now regarded as a permanent feature of the private equity ecosystem.

A key theme was that liquidity management is increasingly becoming a differentiator for fund managers. Investors are assessing not only returns but also how effectively managers manage fund life cycles, provide optionality, communicate transparently and return capital. As a result, liquidity planning is becoming embedded earlier in fund structuring, governance and fundraising processes.

LPs are becoming far more sophisticated and proactive in how they manage liquidity. Rather than simply waiting for distributions, investors are actively using liquidity solutions to rebalance portfolios, manage sector exposure, maintain commitments to core managers and optimize portfolio construction.

A significant part of the discussion centered on the growing toolkit of liquidity solutions available to both LPs and GPs, encompassing traditional secondary sales, continuation vehicles, preferred equity structures, NAV financing and CFO-style fund financing structures. The consensus was that there is no one-size-fits-all approach: solutions are becoming increasingly bespoke and often involve combinations of financing and secondary market tools tailored to specific objectives.

Another takeaway was the importance of transparency, governance and LP alignment. Successful liquidity solutions depend on clear communication with investors, particularly around motivations, valuation assumptions, risks and intended outcomes. Earlier concerns in the market around NAV financing and continuation vehicles were attributed in part to insufficient disclosure and consultation. This has, in turn, led to a growing role for investor relations teams, LP advisory committees, dedicated capital markets and treasury functions within fund managers.

From the lender perspective, both banks and non-bank institutions are now deeply involved in providing liquidity solutions. Non-bank lenders, particularly insurance-backed capital providers, are playing a larger role given their ability to offer longer-duration capital. Lenders are no longer simply offering capital; they are increasingly acting as strategic partners, helping managers structure customized solutions. There is also a growing focus on data quality, access to portfolio information, valuation scrutiny and ongoing dialogue between lenders and sponsors. As structures become more complex and layered, transparency and information flow are seen as essential to managing downside risk.

The panel broadly agreed that many solutions currently viewed as innovative or controversial will become standard market practice over time. Expected developments include greater LP optionality within fund structures; more integrated and hybrid liquidity products; wider acceptance of continuation vehicles; more sophisticated fundraising-linked financing tools; and increased use of AI and data-driven approaches in portfolio valuation and analysis.

The digital shift: The role of technology in GP, LP and lender strategies

Author: Kyle Johnson

A key theme of this session was the evolution of technology from a cost-reduction tool to a driver of strategic value. The panel described how integrating multiple internal systems and layering generative AI on top of data points has enabled more powerful client insights and better-targeted origination processes, as well as faster underwriting, particularly in large-cap secondaries transactions. The benefits of technology were said to extend well beyond vanilla subscription facilities into complex NAV lending and bespoke structured transactions.

The fastest-growing uses and adoption of AI relate to: (i) preliminary document analysis and due diligence; (ii) the comparison of fund terms against both existing and historic financings and different facility structures; and (iii) automated reporting. The panel also noted emerging use cases in which lender credit systems could integrate with GP origination platforms, allowing AI-driven preliminary assessments of new transactions and potentially accelerating transaction timelines for all parties.

A recurring challenge identified, however, was the fragmentation of data across platforms. With borrowers managing dozens of lender relationships, each with its own portal and reporting requirements, the panel advocated movement toward common data-sharing standards and interoperability between systems. From a confidentiality perspective, the panel acknowledged the limitations and constraints on such information sharing; robust answers have yet to fully crystallize, particularly given the scale of data involved. But the importance of rigorous platform assessment, internal education and express client consent protocols was emphasized.

In closing, the panel identified three priorities for the sector in relation to technology and innovation over the next two years: (i) cybersecurity resilience as platforms proliferate; (ii) the deployment of AI to eliminate routine tasks and to allow teams to focus on higher-value advisory work; and (iii) the role of technology in attracting and retaining clients in an increasingly competitive and sophisticated market. As one observation neatly captured the mood of the session: AI is not here to take our jobs, but the people who harness its power are.

Past as Prologue: How yesterday’s challenges will shape the future of fund finance

Author: Kyle Johnson

The panel traced the market’s trajectory from a relationship-driven niche offering to a mainstream, standardized financing package underpinning a private markets industry that has grown from approximately US$2 trillion in 2008 to an estimated US$23 trillion today, with further significant growth projected by 2030.

Key accelerants were identified as the exponential growth of private markets, the rise of private credit, GP alignment, the involvement of rating agencies, the safety of the underlying asset class, the increasing sophistication of investors and the role of the LMA in standardizing documentation. These factors have collectively underpinned the product’s strong performance through the global financial crisis, COVID and ongoing geopolitical disruption, with the only ‘enforcements’ relating to instances of fraud.

A more recent development is the blurring of traditional fund finance products, with financing arrangements morphing into increasingly structured facility agreements that combine elements of subscription lines, NAV facilities and GP financing. Products are becoming more bespoke and solutions-led, tailored to each manager’s investment cycle and driven by a low-exit environment that has compelled the market to generate liquidity for LPs through new channels – notably continuation vehicles and multi-asset vehicle facilities. The market is increasingly moving toward holistic, life cycle-oriented capital solutions.

The panel acknowledged a fundamental shift in LP attitudes. LPs now actively encourage GPs to bring debt into the structure, and NAV facilities are increasingly being used to support returns and distributions. There remains, however, some discomfort with the risks associated with NAV-backed ‘synthetic distributions’ and with LPs having to ring-fence distributions from such NAV facilities given the risk of recall.

Looking ahead, transparency between GPs, LPs and lenders was identified as critical to sustaining trust and market growth, particularly given increasing portfolio diversification. AI and tokenization are expected to unlock further liquidity and standardization in what were previously considered bespoke assets. The changing LP composition – with high-net-worth investors, aggregator vehicles, retail note feeders and insurance capital entering private markets – was also identified as a key area requiring underwriting evolution, particularly in Europe.

The consensus: the growth trajectory of fund finance remains firmly ’up and to the right,’ powered by deeper partnerships between banks, the relative safety of the asset class, alternative capital providers entering the space and an increasingly engaged LP base.