From the financial press to Limited Partner Advisory Boards, Net Asset Value (“NAV”) loans have captured popular interest across the Private Equity universe. While time has illuminated the merits and considerations of most portfolio-level financing tools used by managers or General Partners (“GPs”) and led to the convergence of sentiment among investors or Limited Partners (“LPs”), we continue to hear animated debate around NAV loans.
Neuberger Berman has over 35 years of experience as an active primary fund investor and is currently a member of over 390 Limited Partner Advisory Committees. As a highly engaged market participant, we believe—in our capacity as both an investor and a manager—that NAV loans are not inherently good or bad, but rather a financial tool that can be used appropriately or less appropriately depending on the facts and circumstances of each transaction.
In this piece, we explore key fact patterns and considerations around NAV loans and ultimately offer a framework for GPs and LPs to analyze these instruments accordingly.