The private equity industry has seen unprecedented expansion, as evidenced by annualized growth in assets under management (AUM) of 14.4% since 2000, according to Preqin. In recent years, private equity sponsors have been compelled to develop unique solutions to address the challenges of accelerated fundraising, evolving competitive dynamics, and the asset class’s relative illiquidity. Net asset value (NAV) loans are now a frequently utilized tool among private equity sponsors to help manage these hurdles. As further described in this report, private equity NAV loans can vary in form, structure, use of proceeds, and inherent credit risk.
KBRA currently rates 54 NAV loans secured directly or indirectly by private equity assets or interests with ratings ranging from A+ to BBB. We analyzed the resilience of KBRA-rated private equity NAV loan exposures considering recent macroeconomic headwinds, the potential for continued devaluation of private equity interests, and the observed slowdown…