Written by Mohith Sondhi, Managing Director of Debt Finance at OakNorth
As we look ahead to 2026, the most important question isn’t whether markets will “bounce back”. The more relevant question is whether we’ve adjusted our expectations to reflect the environment we’re now operating in.
Over the past few years, private equity and the UK fund finance market have had to contend with slower exits, uneven fundraising and a longer-than-expected period of higher interest rates. While there are early signs of improvement in certain areas, my sense is that we are not heading back to pre-2022 conditions. Instead, we are settling into a more pragmatic phase. One where flexibility and creativity matter more than optimism alone.
Fundraising, capital supply and a borrower-friendly market
One theme that continues to shape fund finance is the disconnect between capital supply and underlying fundraising. Fundraising volumes have shown some stabilisation, but capital is increasingly concentrated into fewer vehicles. That has knock-on effects.
Demand for traditional subscription facilities (capital call lines) remains selective, while refinancing activity and bespoke structures dominate discussions. At the same time, there is still significant capital looking to deploy into fund finance, particularly for lower-risk, core products. That imbalance has kept pricing competitive and terms under pressure, sustaining what remains a borrower-friendly market.
Unless we see a meaningful acceleration in exits and distributions, I expect these dynamics to continue through 2026.
Nav financing as a core fund finance tool
NAV financing has been one of the most notable evolutions of this cycle. What was once seen as a niche solution when exits slowed has now become a mainstream liquidity tool within private markets.
More managers are using NAV facilities not as a last resort, but as part of a broader capital strategy, particularly where portfolios contain high-quality but illiquid assets. In that sense, NAV finance has shifted from being reactive to being intentional.
We’re also seeing greater structural flexibility in these facilities. Higher loan-to-value levels, broader collateral packages and longer tenors reflect both competition among lenders and a deeper understanding of private asset portfolios.
Continuation vehicles and longer holding periods
Alongside NAV financing, continuation vehicles and multi-continuation structures continue to grow in relevance. These structures reflect a market adapting to longer holding periods and a more deliberate approach to value realisation.
For fund managers, continuation vehicles offer optionality — retaining conviction assets while providing liquidity pathways for investors. From a fund finance perspective, they also require more bespoke thinking around structure, governance and asset concentration.
The key question for 2026 is not whether these structures persist, but how disciplined their use remains as both sponsors and lenders continue to push boundaries.
GP financing and fund scale
Another area I expect to remain active is GP financing. As private equity funds grow in size, GP commitment requirements have increased materially. Historically, many GPs relied on distributions from prior funds to meet these obligations. With exits slower to materialise, demand for GP facilities has grown.
If fundraising improves, even gradually, this demand is likely to increase alongside it — particularly among mid-market and growth-focused sponsors.
What 2026 looks like for UK fund finance
Taken together, none of this points to a weak market. Instead, it points to a more mature one.
Liquidity tools are becoming embedded rather than opportunistic. Fund finance structures are being designed for resilience, not just efficiency. And lenders are being asked to engage more deeply with portfolios, rather than rely on standardised templates.
For me, 2026 looks set to reward those who plan for uncertainty rather than wait for it to disappear. That applies equally to sponsors and lenders. The environment may be more complex, but with the right approach, it still offers meaningful opportunity.
If you’re looking for fund finance support or want to explore your options, you can find more information and get in touch with us here.
