Reed Smith was a proud sponsor of the Fund Finance Association (FFA) 7th Annual European Fund Finance Symposium in London, on June 19, 2023. The FFA symposium brings together investors, fund managers, bankers and lawyers for education and networking within the fund finance market. Below is a summary of our key takeaways and industry perspectives from the conference.
Key takeaways and industry perspectives
- Fund raising and M&A activities have been slow and whilst larger sponsors remain unaffected, small and mid-size sponsors are finding it more difficult to secure commitments from lenders.
- Lenders are exploring bespoke security structures to address borrowers’ varying needs.
- General partners (GPs) are increasingly looking for lenders who can offer both subscription line and NAV financing solutions.
- Due to higher levels of ‘NAV window-shopping’, execution risk has increased and GPs are looking for lenders who are committed to the NAV market in the long term.
- Finding liquidity in the market remains a challenge for GPs, although the emergence of non-bank lenders, combined with innovations such as the rating of facilities, is set toincrease the number of lenders in the market.
- GPs are looking for reliability. However, they are also looking to diversify, rather than concentrate relationships and transactions with a single credit institution.
- Limited partners (LPs) are more selective in the funds they allocate to and are asking more questions about sponsors’ investment management and debt repayment practices.
- LPs are looking for alignment of environmental, social and governance (ESG) principles when investing in a fund. The regulatory landscape in Europe is set to (i) introduce more stringent ESG reporting requirements and (ii) incentivise sustainable finance. This is expected to further drive growth in ESG linked facilities in the coming years.