Private Funds CFO circulated a newsletter Monday highlighting, among other things, a potential trend for limited partners to use leverage as a way to meet capital call obligations, including lenders providing NAV loans to help manage cash flows during low distributions and continuing capital calls.
Mourant hosted a webinar panel last Friday, discussing COVID-19’s impact on private equity and fund financing, with a focus on Asia-Pacific as well as potential industry-wide effects. The panelists discussed the lack of LP defaults, COVID-19’s impact on the secondary market, lender appetite for financing new subscription facilities, the importance of GP-LP and sponsor-lender relations and future opportunities in fund finance.
Fund finance clearly survived the opening flurry of COVID-19 punches. Our transaction structures held solid; deal volume for many market participants actually accelerated through March and April and into May. And we are still busy on new deals. But I think this is going to be a long game. Below are my updates on what we have seen in the market the last two weeks and what I’m forecasting going forward.
Jesse Hurley, Head of Global Fund Banking at Silicon Valley Bank, connected with Cadwalader’s Mike Mascia in this week’s podcast edition of Fund Finance Friday: Industry Conversations. In the podcast, Jesse covers what Silicon Valley Bank is seeing in their fund finance portfolio, including investor capital call funding performance, facility utilization and pipeline opportunities. He also discusses the growth of the SVB Fund Banking team and their many new hires, predictions for the venture capital and angel investment space for the remainder of 2020 and the corresponding impact on the innovation economy.
The funded status improved meaningfully for pension funds in April. The Milliman 100 Public Pension Funding Index, which tracks the 100 largest government-sponsored defined benefit pension plans, showed an investment return of 5.92% for the month, reducing the group’s estimated deficit by $200 billion to end the month at $1.619 trillion. The funding ratio for index constituents improved to 69.8% from 66.0% at the end of March. The group controlled total assets of $3.750 trillion at the end of April.
The true slowdown in fundraising is likely to become more evident in Q2, and reduced capital from LPs is expected to lead to a competition for new commitments and deal terms that shift to favor LPs, according to observations in the recently published Wilshire Private Markets Update.
Uncertainty around asset values and settling on a valuation process are key challenges for lenders looking to provide NAV loans in the current environment, according to comments from Debevoise & Plimpton LLP partner Ramya Tiller summarized in Private Funds CFO.
Dee Dee Sklar, former vice-chair of subscription finance at Wells Fargo, is now a senior advisor for the London-based firm 17Capital.
Private Equity Wire published an article this week titled “New research highlights how fund finance will help GPs combat impact of Covid-19.” The article focuses on a survey completed by Intertrust, discussed at a recent webinar for industry professionals, that looked at how GPs will make use of the tools and options provided by the fund finance market to address liquidity management.
A tip of the cap to our colleagues in the firm’s Financial Services Group, which was named the 2020 International Financial Law Review (IFLR) Americas Financial Services Regulatory Team of the Year.