How private funds are financed today: subscription lines, NAV loans and secondaries

The short answer

• A private fund interest is a stake in a private credit or private equity fund, usually a limited partnership. It is not listed, it is valued periodically, and moving it usually needs the manager's consent.
• It is already financed. Funds borrow against their investors' unfunded commitments (subscription lines) and against the value of their portfolios (NAV facilities). Investors sell their stakes in a secondary market.
• It is not margin collateral. Regulatory lists of eligible collateral for derivatives margin do not include private fund interests.

Why a fund interest is hard to move

• Consent. Under the English Limited Partnerships Act, unless the partnership agreement says otherwise, a limited partner may assign its share only “with the consent of the general partners” [1].
• No redemption. Most private funds holding UK assets are closed-ended drawdown funds, in which investors cannot redeem during the fund's life. This covers 96% of UK private equity exposures [2]. In the US, private debt funds are traditionally locked up for 7 to 10 years [3].
• Capital calls. Investors commit capital that the manager draws over time. Around $4 trillion of the roughly $16 trillion in private market funds was committed but not yet drawn in 2025 [14].
• Valuation. Private assets are marked manually, usually each quarter, and are not marked to market [5] [7]. The FSB notes that quarterly valuations “may be adequate in normal market conditions but less so under stress” [4].
• Semi-liquid funds have caps. Perpetual-life BDCs and interval funds in the US, which allow periodic redemptions, mostly cap them at 5% of NAV a quarter. In the first quarter of 2026, many received requests well above that, and accepted redemptions exceeded inflows for the first time since these vehicles were created [3].

How private funds already borrow or find liquidity

Tool	What secures it	Typical terms	What supervisors say
Subscription line (capital call facility)	Investors' uncalled commitments, the manager's right to call them, and the accounts that receive the cash	About 200bp over benchmark, 1–3 years (FSB, Q3 2025) [4]	The most common bank facility to private credit funds [4]. The PRA found “a creeping sense of complacency” because of a lack of loss history [6]
NAV facility	A fair-value estimate of the fund's assets, or a portfolio of fund interests	About 200–400bp, 3–5 years; loan-to-value generally limited to 30% in FSB member data [4]	Described as “leverage on leverage” on illiquid, hard-to-value collateral [5]. The FCA found most firms had used NAV financing but did not document the conflict that valuations “could be inflated” to avoid breaching an LTV covenant [7]
Secondary sale, investor-led	Not a loan: the investor sells its fund interest	US$56bn of volume in the first half of 2025, industry data [8]	Needs manager consent and a buyer; priced against the latest NAV
Continuation vehicle, manager-led	Not a loan: the manager moves assets into a new vehicle	US$47bn in the first half of 2025, industry data [8]	Increasingly used while exits through listings are subdued [14]

Banks are exposed through these lines. In the Federal Reserve's supervisory data on large US banks, committed lending to private credit vehicles grew from about $8 billion in early 2013 to about $95 billion at the end of 2024 [13].

Why fund interests are not margin collateral today

• Uncleared derivatives. The international margin standard lists cash, high-quality government, corporate and covered bonds, major-index equities and gold, on the principle that collateral must be highly liquid and hold its value in stress [9]. The UK rules allow fund units only if they are UCITS with “a daily public price quote” [10].
• Central clearing. A CCP must accept “highly liquid collateral”. Securities must be freely transferable, have an active sale or repo market and reliable, regularly published prices [11].

Private fund interests meet none of these tests today: they need consent to transfer, have no active market and are priced quarterly.

Where tokenisation fits

Tokenisation can change the record and the transfer process. It can put the register on a shared ledger, check investor eligibility automatically, and record a pledge and its release. It does not change the treatment by itself: the PRA says tokenised assets generally receive “the same prudential treatment as their non-tokenised equivalents” where the rights and risks are the same [12]. And it does not make the loans or companies inside the fund any easier to sell or value.

See our deep dive: Private markets as collateral, and our tracker of tokenised private-market funds.