NAV Financing in Tandem with Existing Bank Financing for Family Offices

Family offices, as sophisticated stewards of significant private wealth, often maintain complex, diversified investment portfolios spanning both public and private markets.

To manage their liquidity and pursue new investment opportunities, many family offices have established relationships with private banks that provide a range of financing solutions, including traditional lines of credit secured by liquid assets, such as marketable securities.

While these bank financing arrangements are a valuable part of a family office’s financial toolkit, they often fall short when it comes to leveraging the value of illiquid private-market investments. Private banks are typically conservative in their lending practices and may be unwilling or unable to lend against assets such as private equity fund interests, for which there is no readily available public market. This is where Net Asset Value (NAV) financing can play a powerful and complementary role.

NAV financing is a specialist form of lending designed to unlock the value of private-market portfolios. A NAV lender will conduct a detailed assessment of the family office’s private equity, venture capital, and other private investments to determine their Net Asset Value. Based on this valuation, the lender can provide a credit facility secured by future distributions from this portfolio. This allows the family office to access a new pool of liquidity that was previously locked up in its illiquid holdings.

Crucially, a NAV facility can be structured to work in tandem with a family office’s existing bank financing arrangements. The NAV loan is typically ring-fenced to the private asset portfolio, meaning it does not interfere with the collateral or covenants of the family office’s existing bank loans, which are secured against the liquid part of the portfolio. This creates a more holistic and efficient capital structure, allowing the family office to leverage its entire balance sheet, both liquid and illiquid.

For example, a family office may have a line of credit with a private bank that is secured by its portfolio of stocks and bonds. This provides a ready source of liquidity for short-term needs. In parallel, the family office can establish a NAV facility secured by its private equity fund interests. This can be used for longer-term strategic purposes, such as making new private equity commitments, co-investing alongside its favourite fund managers, or providing capital to its own operating businesses.

By combining traditional bank financing with a specialist NAV facility, a family office can create a more robust and flexible financing platform. It allows them to optimise their use of leverage, access a greater quantum of liquidity, and pursue a wider range of investment opportunities. In an environment where private markets are an increasingly important component of a diversified portfolio, the ability to leverage these assets effectively is a significant strategic advantage for any family office.