Light reading this week: We zoom out to macro drivers influencing fund finance in 2026 and tell the story in charts.
The Market Continues to Operate on Ample Lending Capacity
- Bank lender engagement, defined as capacity and willingness to originate in the sector, operates as a key driver to fund finance origination volume.
- Lending capacity remains robust in 2026, illustrated by the above-trend YTD asset growth for U.S. banks.
Reflecting the interest rate environment, balance sheet allocation has shifted toward securities in the past two months but aggregate loan exposure nonetheless exceeds most recent years.
Note: The Federal Reserve’s weekly H8 release is based on a weekly survey covering a sample of around 850 U.S. banks. NSA: non‑seasonally adjusted.
Source: Federal Reserve H.8 (Assets and Liabilities of Commercial Banks) and Hogan Lovells Cadwalader.
Lending Capacity Shapes the Fund Finance Market
- Ample lending capacity influences the fund finance market by broadening the lender base, supporting deal volume, skewing the deal mix toward bilateral over syndicated transactions, and informing facility pricing.
Source: U.S. fund finance representations of Hogan Lovells Cadwalader.
Source: U.S. fund finance representations of Hogan Lovells Cadwalader.
Persistent Factors Support Further NAV Growth
- GFC-like distributions-to-paid-in (DPI) ratios add motivation for sponsors to look down to assets as a source of capital. Global private fund assets exceed $16.0 trillion according to Preqin data.
Source: Preqin and Hogan Lovells Cadwalader
Source: Preqin and Hogan Lovells Cadwalader
Source: International Monetary Fund and Hogan Lovells Cadwalader.
- Higher sovereign debt supply, uneven long-duration bond demand, and elevated inflation all challenge exits by maintaining upward pressure on interest rates. These have defied “transitory” narratives so far into the 2020s.
Source: CME Group and Hogan Lovells Cadwalader. this…
Source: U.S. Department of the Treasury and Hogan Lovells Cadwalader.
- Higher rates also pose a headwind to fundraising by improving the relative attractiveness of public debt products, reducing the real return offered by a static 8% closed-end pref rate, and extending the duration of in-place investments.
Source: U.S. Bureau of Labor Statistics and Hogan Lovells Cadwalader
- These factors are readily apparent in transaction activity: Our YTD NAV originations in the U.S. (closed and processed new deals plus increase and extension amendments) total $20.1 billion in lender commitments, already exceeding full-year totals for any year prior to 2025.