Skip to content 
Article by Nick Maton, Managing Director, Alpha Private Markets, as published in Insight/Out magazine #35.
The fund finance market is a mirror of the private capital funds it serves; fast-moving, ever-evolving, and constantly under pressure to innovate. As GPs adapt to shifting investor expectations, complex liquidity demands and changing fundraising dynamics, the financing tools that support them must evolve in lockstep.
Whether it’s subscription lines, NAV facilities or GP financing, fund finance offerings must continuously evolve as new players enter the market, regulatory pressures deepen and borrower needs shift.
Against this backdrop, we’ve drawn on insights from Alpha Match, our proprietary lender platform tracking over 400 lender profiles and 130+ data points per profile, to explore what’s really happening beneath the surface. Combined with live deal experience from the Alpha Fund Finance team, this dataset provides one of the most current views of fund finance activity in the market today.
In this article we spotlight the most notable trends emerging across each of the market’s core products:
- Subscription lines: How a more diverse investor base is reshaping lender appetite
- NAV facilities: Why non-bank lenders are taking the lead
- GP financing: Why this high-demand product still isn’t functioning at scale.
Subscription Lines: Adapting to a changing investor base
Subscription credit lines, which are secured against LP commitments, have become a routine part of fund operations. They offer administrative ease, IRR enhancement and liquidity smoothing. But as the investor base evolves, so too must this staple product.
In recent years, private capital fundraising has declined from its $1.8 trillion peak in 2021 to $1.2 trillion in 2024. At the same time, non-traditional capital structures, particularly open-ended and evergreen vehicles, are gaining traction. According to McKinsey, alternative channels now account for $7–8 trillion in AUM, a 20% year-on-year increase, contributing to a global private markets size of approximately $22 trillion.
This diversification of capital brings new questions for lenders: will they underwrite against non-institutional commitments from HNWIs, family offices, and fund-of-funds?
Our data analysis shows clear regional and structural differences. US lenders are more likely to include non-institutional investors in the borrowing base, reflecting their deeper experience with these LP types and a more standardised regulatory regime. While European lenders, operating under stricter internal ratings-based (IRB) models, are more conservative.
Bank vs non-bank structures also reveal contrasts: non-banks show marginally greater flexibility and lower exclusion rates when assessing non-institutional capital.
Key takeaway: For GPs raising capital from a broader investor base, the choice of lender – both in geography and structure – can materially impact the terms and availability of subscription lines. As capital sources diversify, sub-line frameworks must evolve in step.
NAV Facilities: The rise of non-bank lenders
NAV (Net Asset Value) facilities, secured against a fund’s portfolio, have seen a dramatic rise in demand, especially as exits slow and traditional liquidity sources dwindle. With banks being highly selective over which GPs they provide facilities to, increasingly non-bank lenders are stepping in.
The growth of non-bank lenders in NAV finance is reminiscent of the rise of direct lenders in the private debt world. At first, there was hesitation. Many GPs were wary of working with non-bank institutions.
Would a non-bank behave responsibly in a stressed situation? Would their return-driven motivations clash with the long-term nature of fund management? And perhaps most worryingly, would they be a competitor disguised as a lender?
These were fair questions a few years ago. But fast forward to today and the data paints a very different picture. Today, the vast majority of leveraged finance in PE deals comes from direct lenders, a dramatic change from ten years ago when banks dominated the market.
According to Alpha Match data, 73% of NAV Heads of Terms came from non-bank lenders, with just 27% from banks.
Unlike the initial hesitation seen when direct lenders entered the LBO space, it would seem GPs have welcomed non-bank NAV lenders with open arms. And it’s easy to see why.
First, banks are constrained, either by internal capacity, regulatory requirements or an aversion to complex portfolios. Second, non-banks bring flexibility, sector familiarity, and a willingness to underwrite bespoke deals, often backed by institutional capital seeking yield.
Comparing two offers from a recent NAV facility highlights the divergence.
- Bank terms are typically more conservative: lower pricing, but stricter covenants and mandatory prepayment events.
- Non-bank terms come at a premium (e.g., 1100–1300bps vs 600–700bps over SOFR) but are more flexible, with fewer performance-related triggers.
Key takeaway: GPs are increasingly choosing non-banks. Not just out of necessity, but for the agility, speed, and creative structuring they offer. NAV finance is no longer a niche; it’s a catalyst for lender innovation.
GP Financing: High demand, limited supply
Of the three major fund finance products, GP financing holds the greatest misalignments between supply and demand. GPs need liquidity to meet their own fund commitments, especially in a market where exits are delayed, but the lending infrastructure hasn’t kept pace.
Alpha Match data exposes the constraints:
- Of 279 lenders tracked, just 63 (23%) offer GP financing.
- Of those, fewer than a quarter will lend at tickets of £10 million or less.
This is largely because banks, which are heavily reliant on short-term funding, tend to favour revolving credit facilities (RCFs), that don’t align with long-term fund lifecycles.
Non-banks, by contrast, prefer longer-dated deployments (2–3 years minimum) to justify their return thresholds, making small, short-term facilities economically unattractive.
As a result, GPs often find themselves stuck between two imperfect options: short-dated bank lines or high-cost non-bank facilities.
The numbers echo the dilemma:
- Tenor: Non-banks edge ahead with an average of 41 months vs 36 for banks; some stretch to 72 months.
- Pricing: Non-bank GP loans average 1,322bps, compared to 1,009bps from banks.
For many managers, especially in the lower and mid-market, this is a tough pill to swallow. High documentation costs, opaque profitability at the GP entity and complex structures all contribute to lender hesitation.
And while large GPs (with £10bn+ AUM) may access broader solutions from investment banks, smaller firms face a much tougher environment.
Key takeaway: The GP financing market is heating up but remains frustratingly dysfunctional. Until providers adapt their models, or new entrants emerge, many GPs will remain underserved.
