All the Rage in Private Equity: Mortgaging the Fund

At a recent global conference, an undisclosed financial strategy known as a net asset value loan came under scrutiny by Wall Street professionals. Many private equity firms have started using this tool to raise cash quickly by leveraging their investment funds and taking out loans against the businesses they’ve already purchased with loans. This mechanism has gained popularity as dealmakers seek ways to acquire new funds post-pandemic. Some private equity firms are adopting net asset value loans to address the pressure from limited partners who want to receive cash returns. However, concerns have been raised about the long-term risks associated with this strategy.