Fund Finance 2020

There has been substantial growth in the fund finance market over recent years, with more and more funds seeking subscription line or capital call facilities from lenders.

Authors: Leon Stephenson

Capital call or subscription line facilities are debt facilities provided by lenders to funds where the recourse of the lender is to the uncalled investor commitments of the fund. The bank will generally provide a short-term facility to the fund to effectively bridge the commitments of the investors of the fund. Therefore, the bank’s credit risk is on the investors of the fund and their obligations to provide monies to the fund when called upon to do so. This requires detailed credit analysis by the bank on the creditworthiness of the investors they are effectively lending against, usually carried out by assigning each investor a rating together with an advance rate against each investor. Many banks have been and are still entering this market.

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This article was first published in the ICLG to Fund Finance 2020.