Funds: Subscription Facilities in Focus

Subscription facility origination has seen notable accelerated growth in recent years, commensurate with private capital assets under management (AUM). This partly stems from the growing presence of alternative capital providers that now lend in this market to offset the capacity and regulatory constraints facing banks. Some of these nontraditional lenders prefer investing in rated debt instruments, which has contributed to the increased interest in ratings for subscription facilities. KBRA currently rates more than 40 subscription facilities, including traditional capital call facilities as well as hybrid facilities, with ratings ranging from BBB to AA-.

This KBRA report provides an overview of subscription facilities and their categories, examines credit focal points, and assesses the state of this sector in light of mounting macroeconomic headwinds.

Key Takeaways