The NAV finance market could reach $145bn (£113bn) by 2030 and will play a “major role” in the evolution of financial markets, according to Oaktree Capital Management and 17Capital.

Oaktree acquired a majority stake in London-based 17Capital in 2022. In an analysis, the two firms noted the “tremendous growth” of NAV finance, which refers to loans offered primarily to private equity funds based on the net asset value of their investment portfolios.

NAV finance deal flow has more than doubled since 2020, rising to around $44bn in 2023, according to 17Capital data.

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A lack of traditional funding channels during the pandemic kick-started this growth, the firms said.

And NAV finance represented just two per cent of private equity assets under management in 2023, meaning it still has significant room to grow.

The firms cited data from Preqin overlayed with 17Capital assumptions, as of September 2020, which indicate that the NAV finance market could reach $145bn by 2030.

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“We obviously can’t predict exactly how financial markets will evolve in the years ahead, but we think the potential sea change in interest rates that Oaktree has written about extensively could encourage private equity sponsors to seek out new sources of finance, new ways to create value, and new means of enhancing flexibility,” the analysis said.

“We’re confident that NAV finance will play a major role in this ongoing evolution while providing investors with another way to increase their exposure to the expanding universe of private credit.”

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