The growth of the fund finance market has historically been attributed to the rise of credit facilities secured by the unfunded capital commitments of a fund’s investors (Subscription Facilities). A fund’s ability to borrow under a Subscription Facility is subject to a borrowing base calculated based on a percentage of the unfunded commitments of certain included investors in the fund and often subject to certain advance rates and concentration limits. Because the borrowing capacity is driven by investor commitments, Subscription Facilities are most useful to newer funds with significant unfunded capital commitments. The well-documented rise of the Subscription Facility market over the last decade has created a competitive marketplace, driving many lenders to expand their fund financing offerings to provide fund sponsors with the ability to borrow throughout the lives of their funds. One example is the development of net-asset-value facilities (NAV Facilities), which are credit facilities backed by the equity value of a fund’s investment portfolio. In a guest article, Kirkland & Ellis LLP partners Jocelyn A. Hirsch, Samantha Hait and Duncan McKay examine the typical structure of NAV Facilities for secondary funds (Secondary Funds), the collateral that Secondary Funds use to secure those loans and the benefits to funds of using NAV Facilities. See our two-part series on trends in the use of Subscription Facilities: “Advantages for PE Investors and Sponsors Have Led to Adoption by Some Hedge Funds and Credit Funds” (Jan. 24, 2019); and “Structuring Considerations Negotiated With Lenders and Important LPA and Side Letter Provisions” (Feb. 7, 2019).