AlpInvest Partners, the secondary investments unit of buyout firm Carlyle Group, and Abu Dhabi's Mubadala Investment Company are forming a new partnership to provide debt financing to private equity firms, according to a statement seen by Reuters.
As part of the new tie-up for senior fund financing, which is also known as net asset value (NAV) financing, AlpInvest and Mubadala will provide loans to private equity firms, helping them borrow against their funds' assets.
NAV financing has become popular over the past few years as private equity firms have struggled to sell portfolio companies, after facing a tough environment for leveraged buyouts due to high interest rates that made debt financing more expensive. The prolonged deal drought hampered the efforts of buyout firms to return capital to their investors, or limited partners (LPs).
Such financing deals help private equity fund managers raise cash during lean times when they struggle to exit investments.
“As the private equity market returns to some normalcy, these kinds of loans are going to be a really important part of that return to normalcy,” said Michael Hacker, global head of portfolio finance at AlpInvest.
The partnership will provide a boost to AlpInvest, which has facilitated about $4 billion in secondaries transactions since 2018. AlpInvest and Mubadala have completed their first investment as part of the tie-up.
As part of the tie-up, Mubadala will broaden its credit investment strategy to include senior loans against fund portfolios. The move complements Mubadala’s existing co-investment initiatives in areas such as direct lending and technology financing.
AlpInvest, which offers preferred and structured equity solutions alongside traditional debt financing, currently manages $80 billion in assets and counts more than 500 investors, according to its website.