Funds Finance Outlook 2: March 2024
14 March 2024
After a self-imposed exile from the US-based FFA events, I was delighted to travel to Miami for this year's FFA Global Symposium and find out what I have been missing over the last few years. Colleagues' feedback had suggested that since my last New York conference attendances, the event has grown and flourished in the Miami sun. They weren't wrong! With nearly 2,000 delegates and up to 3 streams of sessions at any one time over the substantive 4 days of the conference, the FFA never disappoints!
"NAV finance and the broader fund finance market is an integral and growing part of the private equity industry. Recent discussions with industry colleagues, experts and clients suggests that growth trajectory is set to continue."
"The Miami symposium brings together the fund finance community from across all jurisdictions “under one roof”. It has a great mix of attendees and is the perfect place to meet with existing contacts and to meet new ones. Its success lies in the willingness of all participants to be open to meeting with each other to explore ways of working together. It is a perfect forum for networking and generating fund finance business and deal opportunities; all in the beautiful Miami sunshine."
The noticeable stand out moments from this event?
“My main takeaway from this year’s FFA conference in Miami was the speed at which the Fund Finance market is growing, with the number of delegates significantly up on last year (and last year on the year before that) – a very promising sign for the future.
In terms of discussion and content, NAV remains the topic on everyone’s lips, with a lot of anecdotal observations from lenders and borrowers on current drivers in the market, specifically linked to sensitivities around purpose.”
"Great to see the obvious evolution of the NAV market with some substantive progress on facilities being structured, papered and drawn. Clearly Investor concerns need to be understood and allayed, but the demand exists and is likely to grow, with the financial benefits reflected in fund performance."
One area I had a number of conversations on was GP financings - a great piece here from our Associate, Kishen Vora:
The Ashurst team saw an uptick in GP/co-invest facilities through 2023, so as good an opportunity as any to highlight some key pitfalls in structuring these facilities:
Understand the purpose. If the facility is being used to fund a co-investment commitment which needs to be put in at a specific time hardwired in the limited partnership agreement, being aware of this and the funding timelines is important (and avoid last minute rushes).
Priority Profit Share Security is taken over the priority profit share (PPS) payable to the general partner:
It is useful to understand from the borrower whether they will be amending their fund documents close to closing. The limited partnership agreement may be amended and restated or even new documents entered into at final close (which may be the time when the general partner is required to fund their co-investment!).
With increasing frequency, we are seeing large investors with side letters providing for a discount in the PPS payable – important to have this fleshed out early in any financial model.
Kishen Vora
Associate, London
Kishen.Vora@ashurst.com
+44 20 7859 1312
+44 7810 242 516
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