22 February 2020 - 'There is a Chinese curse which says “May he live in interesting times.” Like it or not, we live in interesting times. They are times of danger and uncertainty; but they are also the most creative of any time in the history of mankind.'
Robert F. Kennedy, Capetown, South Africa, June 1966
2020 was a difficult year for the world, and a challenging year for credit. In our corner of the credit market – fund finance – lenders’ initial response to the pandemic was to pause and re-assess risk exposures. Through spring and summer of last year, many banks and insurance companies ceased to originate new credit facilities to alternative funds. While August typically brings a lull in activity, this time was different: the market started to move again. Though underwriting standards were tighter, credit was once again available to both alternative funds and fund investors.
2020 was the year NAV lending finally came into its own, as funds took advantage of these facilities to ‘play offense’ and increase their buying power. We also noticed an uptick in secondary activity in the fourth quarter after having been relatively muted all year.
As both advisors and lenders, we saw record activity in 2020. At the Citco group of companies, we pride ourselves on our steadfastness during times of crisis: we continued to assist our clients with their financing needs, just as we have always done. We used our expertise, relationships and balance sheet to originate capital call and NAV facilities for both funds and fund investors.
As 2021 is underway, we have continued to see demand across the spectrum from clients. Many have asked about NAV loans as well as hybrid facilities that are underwritten on both unfunded investor equity and portfolio NAV.
The Capital Solutions team is at your disposal to answer any questions and offer unbiased advice on fund facilities or secondary market activity.