Fund finance in 2024: A year full of challenges but also opportunities

AUTHOR: MOHITH SONDHI, SENIOR DIRECTOR OF DEBT FINANCE

 

Fund finance continued to be a growing area of focus for OakNorth throughout 2023 and we were fortunate to once again work with a number of new and returning sponsors.

As we look ahead to 2024, I wanted to share a summary of the key trends that I think will dominate in fund finance over the next 12 months. These include:

  • An increase in funds looking for NAV & Hybrid Facilities especially as PortCo’s require further cash for either covenant breaches, capex or acquisitions;
  • Debt spreads to increase as banks no longer rely on ancillary income to subsidise, for example Sub lines (as we are seeing in the US fund finance market);
  • Banks in particular to be much more focused with their capital and therefore will be difficult for new funds/funds who do not have a track record of borrowing to access capital;
  • General Partner (GP) lines will be harder to access especially as there is limited providers of these facilities, which will cause issues as GP’s require these funds to close their investors;
  • Secondaries will be extremely active and will look to take advantage of the market dislocation which will take place this year.

With the above in mind, 2024 overall will be full of challenges but also full of opportunities for those funds who have the right GP, strategy and funding partner. If you can position yourself as a consistent lender who is willing to lend with confidence through cycles, you can help drive better outcomes for customers, as well as build stronger relationships with them in the future. The current state of the fund finance sector would suggest that these customer relationships will become increasingly important moving forward. A prediction we feel very comfortable with.

If you’re thinking about your 2024 growth plans, get in touch today, and we can discuss your opportunities.

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