By Mohith Sondhi, Managing Director, Debt Finance at OakNorth

Earlier this month, I had the privilege of joining a panel at the BVCA Summit to discuss how today’s macroeconomic environment is reshaping private equity fund finance. The conversation, led by Dana Haimoff of JPMorgan Asset Management, brought together perspectives from sponsors, lenders, and advisors on how our industry is adapting to persistent inflation, stubbornly high interest rates, and ongoing liquidity pressures. Here are my key takeaways from the session.

Navigating a tougher macro backdrop

Over the last three years, private equity has had to adapt quickly to a very different world. The anticipated sharp fall in interest rates hasn’t materialised, and inflation is proving more resilient than expected. For portfolio companies carrying higher levels of leverage, this translates into prolonged cost pressures. Meanwhile, the consumer wallet remains under strain, limiting growth in some sectors.

Against this backdrop, funds are rethinking their financing strategies. NAV financing—once considered a niche, stopgap measure when exits slowed—is now firmly embedded as a mainstream liquidity tool. We’re also seeing more innovative structures emerge, from hybrid facilities to financing linked to continuation vehicles. These developments reflect a market that is becoming both more sophisticated and more pragmatic in how it manages capital.

The evolution of NAV financing

One of the key themes from our discussion was the permanence of NAV financing. It is no longer just a response to stalled distributions, it has become a strategic instrument for funds of scale. The challenge, of course, is to ensure that it is used responsibly: as a tool to fund portfolio growth and strategic opportunities, rather than to artificially boost DPI.

The growing use of NAV facilities in continuation vehicles is an interesting development. While these structures lack the diversification of a broader portfolio, they can provide important flexibility when used appropriately. As with all innovation in finance, the key lies in understanding the underlying assets and aligning incentives between GPs and LPs.

Looking ahead

While there are some green shoots in M&A and fundraising markets, my view is that we are entering a “new normal” rather than a swift rebound. Liquidity tools like NAV financing will therefore remain vital, whether the exit environment is bullish or bearish. For lenders, the lesson is clear: listen closely to clients, avoid pushing product, and focus on delivering bespoke solutions. At OakNorth, that’s exactly what we strive to do – partnering with sponsors to structure facilities that are fit for purpose in a more challenging world.

At OakNorth, we’ve built a track record in fund finance, supporting mid-market funds with facilities ranging from capital call lines to NAV financing. Our recent transactions show how we can move quickly, adapt to complex situations, and provide capital that helps funds navigate uncertainty while still pursuing growth.

Crucially, we remain open for business. As we head into the final quarter of 2025 and look ahead to 2026, our commitment is to continue backing ambitious sponsors with tailored financing solutions. In an environment where caution still dominates, we’ll keep doing what we do best: delivering capital with speed, conviction, and flexibility.