What Is a NAV Loan? A Guide for LPs and Family Offices

A NAV loan is a facility that lets an investor borrow against the net asset value of a portfolio of private market holdings, while keeping ownership of the assets. NAV stands for net asset value, the lender's estimate of what the portfolio is worth. The investor receives cash now and repays the loan from future distributions or a refinancing. For limited partners and family offices, a NAV loan is the main way to create liquidity from a private portfolio without selling fund interests at a discount.

This guide explains how NAV loans work, what serves as collateral, how they are priced, when they make sense, and how they differ from the alternatives. It is written for LPs and family offices considering a facility against their own portfolios.

How a NAV loan works

The mechanics are straightforward. A lender values the borrower's portfolio of fund interests or direct holdings, agrees an amount it will lend against that value, and advances the cash. The portfolio stays in the borrower's name and continues to earn returns. As the underlying funds distribute capital, those distributions are typically used to pay interest and reduce the loan. The facility is repaid in full from distributions over time or refinanced before maturity.

The amount a lender will advance is expressed as a loan to value ratio, or LTV. If a portfolio is worth 100 million and the lender advances 30 million, the LTV is 30 percent. Conservative LTV is central to how a sound NAV facility is structured, because it gives both the borrower and the lender a margin against falls in the value of the underlying assets.

Because the loan is secured against a pool of assets rather than a single company, the diversification of the portfolio matters a great deal. A facility against a single fund interest carries concentration risk. A facility against a spread of interests across managers, vintages, sectors, and geographies is more resilient, which is why diversified portfolios support better terms.

What can be used as collateral

NAV loans are most commonly secured against a portfolio of private equity fund interests, but the principle extends across private markets. Collateral can include interests in buyout, growth, and venture funds, private credit fund interests, real assets and infrastructure fund interests, and in some cases direct holdings and co-investments. What lenders look for is value that is reasonably diversified, supported by credible valuations, and held in vehicles with predictable distribution behaviour.

The quality of the collateral drives both the amount a lender will advance and the price. A diversified book of interests in established managers is treated very differently from a concentrated position in a single early stage fund.

How NAV loans are priced

Pricing has two parts. The first is the cost of the money, usually expressed as a margin over a reference interest rate. The second is the structuring of the facility, which reflects the work of valuing the collateral and putting the protections in place.

The margin depends mainly on three factors. Loan to value comes first: a lower LTV is safer for the lender and prices more keenly. Diversification comes second: a broad, high quality portfolio prices better than a concentrated or weaker one. The expected pace and reliability of distributions comes third, because that determines how quickly the loan is likely to be repaid.

An investor comparing the cost of a NAV loan to the cost of a secondary sale should compare like for like. The headline interest rate on a loan is paid over time and the assets are retained. The cost of a secondary sale is the discount to NAV, which is paid in full and immediately, and the upside on the sold assets is given up. For a portfolio the investor wants to keep, a conservatively sized loan is frequently the cheaper route to the same amount of cash.

When a NAV loan makes sense

A NAV loan suits a specific situation: the investor needs cash now, believes the underlying assets are worth holding, and expects distributions or a refinancing to repay the loan in due course. Common use cases include the following.

Funding capital calls when distributions have slowed and the investor does not want to pause new commitments or sell. Bridging to an expected exit or distribution that is months away. Funding a new opportunity or co-investment that has to be paid for before existing positions distribute. Meeting an operating, tax, or generational need at a family office without disturbing a healthy portfolio. Managing the denominator effect by raising cash against the private book rather than selling into a weak market.

A NAV loan does not suit an investor that wants to exit a position permanently, or one whose portfolio is concentrated, weak, or unlikely to distribute. In those cases a secondary sale or a different solution is more honest about the situation.

NAV loan versus secondary sale

The two are often weighed against each other, so it helps to set them side by side.

The decision turns on whether the need is about timing or about a genuine wish to exit. If the assets are sound and the problem is when the cash arrives rather than whether the assets should be held, a loan usually preserves more value. If the investor truly wants out, the sale is the right tool and the discount is the price of that certainty.

NAV loan versus subscription line

These two are frequently confused because both are forms of fund finance. They are not interchangeable. A subscription line sits at the fund level and is secured against investors' undrawn commitments, the money LPs have promised but not yet paid. It is used by a general partner to smooth the timing of capital calls. A NAV loan is secured against the value of assets that are already owned. An LP or family office seeking liquidity against its existing portfolio is looking at a NAV facility, not a subscription line.

Risks and considerations

A NAV loan is a sensible tool used conservatively and a dangerous one used aggressively. The main considerations are these.

Loan to value discipline matters most. A facility sized too aggressively leaves little margin if the underlying assets fall in value, which can force a sale at the worst possible time. A conservative LTV is the single biggest protection for the borrower.

Repayment depends on distributions. If the underlying funds distribute more slowly than expected, the loan takes longer to repay and costs more. A sound facility is structured with that scenario in mind rather than assuming a normal distribution pace.

Valuation quality matters. The loan is only as well secured as the marks on the underlying assets. Credible, independent valuations protect both sides.

Cost compounds. Interest accrues over the life of the facility, so a loan that is left outstanding far longer than planned can become expensive. The tool works best as a bridge with a clear repayment path, not as permanent leverage.

What lenders look for

An investor preparing to approach a NAV lender can expect questions in a few areas. Lenders assess the diversification of the portfolio across managers, vintages, sectors, and geographies. They review the quality of the underlying managers and the credibility of the valuations. They form a view on the likely pace of distributions. And they consider the purpose of the loan and the repayment path. A well diversified portfolio of interests in established managers, financed at a conservative LTV with a clear use of proceeds, is the profile that attracts the best terms.

How Nodem provides NAV financing

Nodem Capital provides NAV backed loan facilities and preferred equity to family offices, GPs, and LPs, typically between 20 and 100 million dollars and at conservative loan to value against diversified illiquid portfolios. The facilities are built for investors who need liquidity but want to keep quality assets and their upside rather than sell into a discount. If you want to understand what a facility would look like against your portfolio, that is a straightforward conversation to start.

Frequently asked questions

What is a NAV loan?

A NAV loan is a facility that lets an investor borrow against the net asset value of a portfolio of private market holdings while keeping ownership of the assets. The borrower receives cash now and repays the loan from future distributions or a refinancing. It is a way to create liquidity without selling fund interests.

How much can you borrow against a NAV portfolio?

The amount is set by the loan to value ratio. A conservative facility might advance up to around 30 percent of the portfolio's value, though the exact figure depends on the diversification and quality of the collateral and the expected pace of distributions. A lower loan to value is safer for both sides and generally prices better.

What can be used as collateral for a NAV loan?

Collateral is usually a portfolio of private fund interests, which can include buyout, growth, venture, private credit, and real asset funds, and in some cases direct holdings and co-investments. Lenders look for value that is reasonably diversified, supported by credible valuations, and held in vehicles with predictable distribution behaviour.

Is a NAV loan cheaper than selling on the secondary market?

Often, for a portfolio the investor wants to keep. A secondary sale costs the discount to net asset value, paid in full and immediately, plus the lost upside on the assets sold. A conservatively sized NAV loan costs interest over time and keeps the assets. The right comparison is the discount against the total interest cost over the expected life of the loan.

What is the difference between a NAV loan and a subscription line?

A NAV loan is secured against assets an investor already owns. A subscription line sits at the fund level and is secured against investors' undrawn commitments. A NAV loan creates liquidity against held assets, while a subscription line smooths the timing of capital calls for a fund's general partner.

Who uses NAV loans?

Limited partners, family offices, general partners, and private funds use NAV loans to fund capital calls, bridge to expected exits, finance new opportunities, meet operating or tax needs, and manage the denominator effect without selling assets at a discount.