The fund finance market remained resilient in Q3 2024, adapting to a dynamic global environment shaped by economic and geopolitical shifts. Key developments included:
- Fundraising: Capital raised declined to $27 billion, reflecting seasonal challenges and broader market uncertainty. Mega-funds ($5 billion+) dominated, accounting for 45% of commitments despite representing just 4% of fund closures. General Partners remain optimistic about stronger fundraising momentum in the coming months.
- M&A Activity: Global M&A deal values surged 28% year-over-year to $774 billion, supported by lower borrowing costs and increased private equity activity. Private equity sponsors drove 44% of total deal value, boosting utilisation of subscription lines.
- Sub-Line Financing: Pricing tightened further, with term loans continuing to gain momentum due to their cost efficiency and tenor flexibility.
- Market Innovation: Fund portfolio managers are increasingly involved in financing decisions as fund-level financing evolves into a more strategic tool, particularly in the current environment.
- Regulatory and Rating Agency Updates: Fitch introduced a new criteria for NAV loans, while the Bank of England’s thematic review highlighted the increasing scrutiny of private equity-related financing. These developments reflect the growing recognition of fund finance within the broader financial ecosystem while emphasizing the need for robust risk management and transparency.
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