Melting pot
15.07.2024 – Articles
The LP view on tools being deployed by GPs to boost liquidity in the slowest exit market, ever.
In March, Bain’s Global Private Equity Report 2024 summed up the current market in one word: stalled. Indeed, Bain’s analysis found that exits (or rather the lack of them) emerged as the most pressing problem in 2023, with exit value dropping by a whopping 66%, while the number of fund closes fell by almost 55%.
These depressing yet unsurprising figures put bright neon yellow highlighter all over the fact that liquidity solutions are desperately needed to get the market moving again.
It is against this backdrop that 2023 gave rise to managers using NAV facilities to provide distributions to LPs. Several conversations I had with both managers and lenders early last year detailed that in many cases, LPs were urging their GPs to use the loans for this reason or were even exploring the facilities themselves.
But the mood music shifted on using NAV facilities being used for distributions over the course of the year.
According to Capstone’s Liquidity Solutions Survey 2023, 54% of LP respondents said NAV financing was a ‘poor way to access liquidity’, making it the least favoured option (21% of LPs said NAV financing was a ‘good way to access liquidity’; 24% said they were neutral, 1% didn’t know what it was).