Key takeaways
- Dealmaking slowdown: the past three quarters have been slower for fundraising and financing compared to past years, with transactions taking longer and requiring more concentrated lender support.
- Macroeconomic uncertainty: including political shifts, tariffs, wars and fluctuating interest rates, have created hesitancy and delays, while even the possibility of sudden policy moves has disrupted market confidence.
- Structural innovation: lenders and funds have responded with more innovative structures, including increasing use of continuation vehicles, hybrid and NAV facilities, evergreen structures and SMAs.
- GP and investor power: increasingly, investors and funds are leveraging their negotiating power to demand better pricing, terms and tailored investment mandates.
The 2025 Fund Finance conference in London gathered industry experts from banks, funds, law firms and advisory practices to discuss the state of the market in 2025, highlighting macroeconomic challenges, GP-investor dynamics, emerging financing structures and looming regulatory challenges.
One of the key topics discussed was the structural innovation that lenders and funds are using in the current uncertain environment. Continuation vehicles have been increasingly used to extend GP control over assets and provide liquidity options to investors. This benefits investors in that they can either cash out or roll into the new structure if the sale environment proves challenging. Lenders have responded generally positively, but must scrutinize asset quality and valuations closely. Hybrid and NAV facilities continue to grow as GPs seek alternative liquidity sources along with evergreen structures and SMAs, particularly in private credit, as large institutions seek customized, flexible investment structures. Fundraising periods have on average increased from 18 months to three years.
Panels were also focused on the rise of HNW (high net worth) investors, which are increasingly present in private markets, pushing GPs to adapt, and challenging lenders to finance against investors traditionally seen as having more complex risk profiles. Many of these were in the Middle East, where sovereign wealth funds and other institutional investors from the region are also becoming more influential, dictating terms and expanding beyond their home markets.
Regulation, particularly CRD VI, was also a hot topic. CRD VI, effective in January 2026, will restrict non-EU entities from conducting lending activities into Europe unless exemptions apply. Uncertainty remains — implementation will vary at the national level, and key terms and definitions still require legislative clarity. While traditional banks face capital constraints, non-bank lending in this space continues to grow, and they are playing a prominent role in the current fund finance market. However, regulators are focusing on them with greater scrutiny, with the potential for systemic oversight in the future. Other regulatory pressures are making unrated facilities more expensive, driving demand for rated structures, and lenders are using multiple different strategies for risk sharing, such as credit risk insurance, syndication and securitization to manage balance sheet pressures.
Other panels focused on the increased use of securitization techniques, including SRTs, rated feeders and CFOs as the range of innovative structures continues to evolve.
Looking ahead, the fund finance industry faces a delicate balance of macro-uncertainty, evolving investor demands, and regulatory headwinds. Innovation in structures and close GP-investor-lender collaboration will be key to navigating the next few years. GPs must invest in dedicated financing and technology teams to manage growing complexity, while lenders are expected to spread risk more widely and adopt capital models in response to regulatory pressure.
Jody Anderson (Associate, White & Case, London) contributed to the development of this publication.
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