NLC Fund Finance Market Report – Q1 2023

Navigating the Waves: The US Regional Bank Crisis and The Emergence of Institutional Investors in the Fund Finance Market


In this quarter’s report, NLC team delve into recent market developments and their implications, particularly focusing on the US regional bank crisis, its deep-seated impacts on the Fund Finance market, and the potential opportunities it has created for institutional investors and non-bank lenders.

In the first section, we discuss the role of US regional banks in the fund finance market and the ramifications of their crisis on market liquidity. We highlight the interplay between constrained lenders and the subdued fundraising environment, arguing that should fundraising rebound to previous levels, the current FF lending universe will struggle to provide sufficient credit, forcing GPs to explore alternative routes.

The subsequent section focuses on what institutional investors can bring to the fund finance market. We delve into the benefits of expanding the market to include these players and what changes may need to be implemented to facilitate their entry at scale. The shift towards a more inclusive market holds the promise of enriched diversity and heightened optionality, while potentially mitigating the impact of market shocks such as the regional bank crisis.

We also present an innovative proposition on how the current Revolving Credit Facility (RCF) and a potential Institutional Term Loan Facility (TLF) could interplay to enhance the effectiveness and cost-efficiency of borrowing.

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