Private Credit Risk Solutions

Hedging Capabilities 

for NAV Lenders

NAV Facility providers can offer limited interest rate and foreign exchange hedging tools within their loans directly.  Like standard hedging routes involving third-party hedging banks, these risk solutions decrease loan-level risk and may be integral to both parties' investment thesis.  But when integrated into a NAV Facility itself, they can vastly reduce hedging burdens and implementation timelines.

HedgeNAV develops and implements ways for NAV-based lenders of all sizes to provide simple-but-effective hedging solutions for their borrowers.  A key feature is that they do not rely on credit from or share security with hedging banks.  Instead, they are funded by affiliates of the managers' lending entities or by a separate entity managed by HedgeNAV.

Foreign Exchange Hedging

A growing subset of Private Credit firms offer concentrated NAV Facilities to private equity or real estate funds during the funds' Harvesting Period.  To the extent the underlying portfolio is international, adverse FX rate movements can shrink the fund's NAV.  Yet the liquidity requirements of typical fund-level FX hedging programs may be incompatible with NAV-based financing terms.

A NAV-based lender's ability to dampen currency risk on an asset portfolio can be a powerful risk reduction tool for both parties.

For more, please see the "FX - Detail" tab.