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Bailey McCann, Opalesque New York:

The Institutional Limited Partners Association (ILPA) has issued new guidance for investors and general partners around the use of net asset value loans.

The new guidance intends to articulate a shared set of industry expectations around how GPs engage their LPs in the use of NAV-based facilities as a liquidity and portfolio management tool.

Concerns reported by LPs include limited insight into when NAV-based facilities are being used, the absence of any reference language governing the use of such facilities within older Limited Partnership Agreements (LPAs), and the fact that GPs often undertake NAV-based facilities without engaging or notifying LPs or the Limited Partner Advisory Committee (LPAC).

ILPA recommends that:

• Where the LPA is silent, GPs seek LPAC consent prior to implementing a NAV-based facility, regardless of the use of proceeds

• GPs seek LPAC approval for the use of NAV-based facilities for distributions, regardless of whether the LPA includes governing language

• Any conflicts of interest associated with a NAV-based facility be brought to the LPAC

• Legal language be included within new LPAs that establishes clear expectations and guardrails regarding use of the facilities

• LPs proactively discuss NAV-based facilities with their GPs to understand whether fund documents for older funds have been interpreted to exclude facilities at the SPV/master holding......................

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