The credit a fund runs on, subscription lines against undrawn commitments and NAV facilities against the portfolio, documented and negotiated for funds and lenders alike, with the facility read against the fund's own constitution before it is signed.
A subscription line is secured on a right nobody can see: the general partner's power to call capital, pledged to the lender and perfected by a UCC-1 filed where the fund is organized, plus control over the account the capital lands in. Whether it can be pledged at all was answered years earlier in the limited partnership agreement, in a borrowing cap, an encumbrance clause and the side letters' sovereign-immunity language.
The borrowing base is where the facility lives. Advance rates differ for rated and unrated investors, concentration limits cap any single name, and an exclusion event drops an investor the day it defaults, downgrades or asserts immunity. A NAV facility swaps that for a loan-to-value covenant; ILPA's July 2024 guidance asks sponsors to disclose one to the advisory committee and seek consent where it funds distributions.
We act for funds and their sponsors, and for the banks and credit funds that lend to them, never on the same facility. When a subscription-line lender failed in March 2023, the funds that coped already had a clause on defaulting lenders, the kind nobody reads until the week it matters.
Subscription (capital-call) facilities secured against investors' undrawn commitments. We handle the borrowing base, included-investor mechanics, cure rights, and the security over the capital-call right that makes the line bankable early in a fund's life.
NAV facilities secured against the value of the fund's portfolio, including valuation and borrowing-base mechanics, asset coverage covenants, and the structuring that lets a fund borrow against deployed capital later in the cycle.
Hybrid facilities that combine commitment and asset collateral, plus GP and management-company lines and co-investment financing, with the credit shaped to the borrower's place in the structure and the security it can actually offer.
Pledges of capital commitments, accounts, and portfolio assets, drafted, perfected, and coordinated across the onshore and offshore jurisdictions where the fund's vehicles and collateral sit.
Reading the credit documents against the limited partnership agreement and side letters, checking borrowing limits, the scope of the pledged capital-call right, and encumbrance restrictions, so the facility fits the fund's constitution rather than breaching it.
Representation for banks and credit funds lending into the asset class, covering credit-agreement drafting, security review, fund-document diligence, and the included-investor and default analysis a lender relies on before it advances.
A subscription line leans on undrawn commitments and works best early. A NAV facility leans on the portfolio and works later. Mapping the instrument to where the fund is in its life is the first decision to get right.
The limited partnership agreement caps borrowing, defines the capital-call right, and may limit encumbrances. A facility that exceeds those limits is a problem before it closes, which is why the credit and the constitution are read together.
Included-investor lists, concentration limits, and cure mechanics decide how much can actually be drawn and what happens if an investor weakens. The headline commitment is rarely the available amount.
Under Article 9 a pledge of the capital-call right is perfected by a financing statement filed where the fund is organized, and the collateral account only by a control agreement with the account bank. A Cayman or Luxembourg vehicle adds a local security document and opinion, plus investor notices where the LPA requires them.
In March 2023 a subscription-line lender failed inside a week, and funds found out whether their facility let them replace a defaulting lender, draw on the remaining commitments and release the collateral account. Those mechanics are negotiated at signing or not at all, and a borrower who skipped them negotiated them under duress.
The SEC's 2023 private fund adviser rules, which would have required quarterly borrowing disclosure, were vacated by the Fifth Circuit in June 2024. What remains is contractual: the LPA's reporting covenant, ILPA's 2017 and 2020 guidance on line usage, and the ILPA performance template released in 2025, which shows returns with and without the line.
The instrument is matched to the fund's stage, a subscription line against undrawn commitments, NAV against the portfolio, or a hybrid across both, and the term sheet fixes the borrowing base, margin, and collateral perimeter before drafting begins.
The LPA and every side letter are read against the proposed facility: the borrowing cap, the scope of the capital-call right being pledged, sovereign-immunity and transfer language, and which investors will survive the lender's included-investor test.
The credit agreement and security package take shape: pledges of the call right, the collateral account, concentration limits, exclusion events, and cure mechanics, with each clause negotiated knowing how the other side of the market reads it.
Security is perfected under the law of each jurisdiction where a vehicle or account sits, investor notices go out where required, local counsel opinions land, and conditions precedent are checked off. Then the fund draws.
A facility lives in its borrowing base, whatever the headline commitment says.
Fund finance is the body of credit a fund and its managers borrow against, most commonly subscription (capital-call) lines secured by investors' undrawn commitments, and NAV facilities secured by the fund's portfolio of investments. It also reaches hybrid facilities, GP and management-company lines, and co-investment financing. The collateral, the borrower, and the point in the fund's life all change the analysis, which is why the credit terms and the fund's own constitutional documents have to be read together.
A subscription line is secured against the undrawn capital commitments of the fund's investors and the right to call them, collateral that is strongest early in a fund's life when most commitments are still uncalled. A NAV facility is secured against the value of the fund's portfolio and works later in the cycle once capital is deployed. They sit on different collateral, carry different covenants and borrowing-base mechanics, and answer different needs, so the choice follows where the fund is in its life.
Both, though never on the same facility. For a fund the work is fitting the line inside the LPA's borrowing cap and encumbrance clause, keeping the included-investor list wide and the exclusion events narrow, and making sure a lender's default is a cured event rather than a crisis. For a lender it is the reverse: diligence of the LPA and every side letter, a borrowing base that drops a weakened investor quickly, and security perfected in every jurisdiction a vehicle or account sits in. Having drafted each side's position, we know which clauses get traded and which only get priced.
Yes, and it is one of the first things to check. The limited partnership agreement sets the fund's borrowing limits, the scope of the capital-call right being pledged, and any restrictions on encumbering commitments or assets. A facility that exceeds those limits or pledges rights the LPA does not grant is a problem before it is signed. We read the credit documents against the LPA and side letters so the facility fits within the fund's own constitution rather than colliding with it.
Yes, in two ways. Perfection follows the vehicle: a Delaware partnership's capital-call right is perfected by a UCC filing and its account by control, while a Cayman or Luxembourg feeder needs a local security document and a local opinion, so a master-feeder structure produces a security package in two or three legal systems. Regulation follows the parties: a registered adviser reports fund borrowings on Form PF, a bank lender prices the line against its own capital rules, and the LPA's reporting covenant now carries the disclosure the SEC's vacated 2023 rules would have imposed. We map both before the term sheet.
Subscription lines are typically put in place at or shortly after the first close, bridging capital calls and smoothing the timing of investments while commitments are still largely uncalled. NAV and hybrid facilities tend to arrive later, once capital is deployed and there is portfolio value to lend against, and they fund follow-on investments, manage liquidity, or support distributions. Mapping the facility to the stage of the fund is part of getting the credit terms right.
Formation and launch counsel for PE, venture, hedge, and real-estate sponsors, from vehicle selection and the limited partnership agreement to the offering documents a facility is later read against.
Explore →Master-feeder, parallel, and onshore/offshore architecture, the multi-jurisdiction structure that decides where a facility's collateral sits and how its security is perfected.
Explore →Adviser registration, exemption analysis, and the investment-management and securities rules that a regulated borrower or lender brings into a fund finance facility.
Explore →Reviewed by Jonathan D. Herpy, Sr., Senior Partner · Last updated October 2026 · Educational overview · Not legal advice
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