The missing middle in NAV lending
Fund finance has passed $1tn. Liquidity for portfolios under $2bn has not kept pace.
Nodem Capital CIO Alex Branton has written for Alternative Credit Investor on the structural gap in the NAV lending market. The article, titled The Missing Middle, examines why a market that has passed $1tn in size still leaves most borrowers without access to portfolio-backed credit.
What is the missing middle in fund finance?
The missing middle is the segment of borrowers seeking NAV facilities between $20m and $100m. Bank desks and the largest non-bank lenders typically write facilities of $200m and above, secured against conventional buyout portfolios. Family offices, mid-sized GPs, holding companies and LPs with portfolios under $2bn fall below minimum ticket sizes or outside standardised credit boxes. Almost no lender is built to serve them.
Why does the gap exist?
The article sets out three drivers. First, demand for liquidity is structural: distributions have run at roughly 11 per cent of NAV for four consecutive years, against a 29 per cent average between 2014 and 2017, with around $3.8tn tied up in some 32,000 unsold companies. Second, specialist capital is thin: only one to two per cent of private markets NAV trades in secondaries in any given year. Third, lender economics push everyone toward the same large, brand-name funds, which compresses pricing at the top of the market while leaving the lower mid-market underserved.
What are NAV loans used for today?
Since ILPA's 2024 guidelines, proceeds are used far less for distribution acceleration. Follow-on investments are now the single largest use, alongside add-on M&A and refinancing of expensive asset-level debt. Used this way, NAV finance complements an exit rather than substituting for one.
Read the full article
The full piece covers the credit case for underwriting smaller, complex portfolios and why specialist capital will matter more as the liquidity squeeze continues into 2026 and beyond.
Read The Missing Middle at Alternative Credit Investor: https://alternativecreditinvestor.com/2026/07/07/the-missing-middle/
Nodem Capital is an FCA-authorised NAV lender providing portfolio-backed facilities of $20m to $100m+ to family offices, GPs, LPs and holding companies.