Fund Finance symposium highlights surge in structured finance and retail fund innovation
Last week, the Fund Finance Association (FFA) held its 9th Annual European Fund Finance Symposium at Old Billingsgate in London, a strikingly repurposed site of the old fish market by the Thames. This event remains a pivotal gathering for fund finance professionals, attracting a broad spectrum of market participants, including investors, fund managers, bankers, and legal experts. The symposium offered a prime opportunity for networking and in-depth exploration of current fund finance developments.
The agenda reflected the market's expanded scope and sophistication, covering a wide array of topics such as net asset value (NAV) lending, the rise of alternative lenders, securitisation structures, issues facing institutional investors, credit ratings, and credit risk transfer (CRT) mechanisms. This variety echoed the fund finance market's maturation and the novel opportunities it has fostered in recent years. Central to discussions was a call for continued innovation among participants to address the challenges posed by today’s evolving macro-economic environment. Despite headwinds like delayed private equity exits and a subdued fundraising climate, attendees were urged to adopt a positive outlook and develop flexible, hybrid financing solutions to serve all private fund participants effectively. The industry’s talent pool coupled with remaining available capital were seen as critical assets for creativity and adaptability in structuring finance solutions.
A significant focus was on the innovation in retail fund structures aimed at high net worth individuals. The growth of evergreen vehicles in the private equity secondaries market was highlighted as a promising area for financing opportunities. However, lenders must navigate complexities such as the open-ended nature of investor inflows and outflows and the specific recourse implications regarding high net worth individuals. While still at an early stage, the industry’s progress in extending credit to uncalled commitments in these retail-focused funds was acknowledged, offering optimism for substantial future growth.
The financing of secondary acquisition transactions also emerged as a key growth segment, affirming predictions from prior symposia. The market’s expansion included significant portfolio secondary sales, serving as vital liquidity management tools and strategic mechanisms for institutional investors to manage their private equity holdings. Notably, distressed secondary sales have not been a major factor in this growth, which mainly stemmed from more structured portfolio transactions. Panelists observed dynamic investment strategy shifts among larger investors, shaping secondary portfolio management and indicating sustained momentum in this sector.
Structured finance techniques took centre stage with panels dedicated to securitisation, rated note feeders, and collateralised fund obligations (CFOs). The discussions acknowledged a palpable rise in the use of securitisation across fund finance products such as sublines, NAV financings, and asset-based lending (ABL). Participants distinguished between ‘true’ securitisations—which carry distinct regulatory demands—and transactions applying securitisation techniques without triggering full securitisation status, an important nuance for compliance considerations. Panellists underscored that the approach to securitisation in fund finance aligns closely with other asset classes, though differences in underlying asset types necessitate tailored risk assessments and portfolio analyses.
Innovative forward flow arrangements gained attention as a ‘win-win’ structure, allowing banks to maintain client relationships and origination while providing investors exposure to fund finance assets without onerous regulatory burdens. Synthetic securitisations—known as SRT in Europe and CRT in the US—were also projected to increase. These allow banks to reduce regulatory capital requirements, potentially enabling more competitive borrower pricing. Such structures represent a significant advantage for banks managing capital-intense subline portfolios.
In connection with structured finance, rated note feeders and collateralised fund obligations were described as growing vehicles offering dual benefits: advantageous financing avenues for fund managers and attractive, super-leveraged investment opportunities for institutional investors. The panels collectively conveyed a theme of convergence between traditional fund finance and structured finance methodologies, forecasting this integration will intensify.
Overall, the symposium’s tone was notably optimistic, buoyed by the industry’s demonstrated resilience and adaptive spirit in the face of volatility and ongoing challenges. The imperative for creativity and innovation was a consistent refrain, reminding participants that reliance on established solutions alone may not suffice in today’s fast-changing market. The keynote by former Premier League footballer Gary Neville resonated well with this ethos when he challenged attendees by asking, “Did you expect every day to be a good day?”—a pointed reminder of the need to embrace change proactively and remain agile.
This gathering reaffirmed the fund finance sector’s commitment to evolving and advancing amidst shifting economic landscapes, leveraging a rich talent pool and capital availability to craft flexible, innovative solutions that meet the broadening needs of private fund participants.