Wealthy individuals are increasingly borrowing against their private equity holdings as a response to a prolonged downturn in deal-making that has reduced cash returns from buyout funds over the past four years. This trend, previously limited to institutional investors, is gaining traction among family offices and high-net-worth individuals seeking liquidity without selling assets at a discount.

Private equity buyout funds—the largest segment of the private capital industry—have experienced diminished payouts since 2022 due to slower transaction activity. This has prompted stakeholders, including pension funds, fund managers, and private investors, to explore alternative financing options while their investments remain illiquid.

Net asset value (NAV) lending, which involves borrowing against the estimated value of private equity and private credit holdings, offers investors a way to unlock capital without triggering a sale in the secondary market, where assets often trade below their book value. According to Goldman Sachs, clients are showing less patience for investments that do not generate immediate returns, increasing demand for such financing arrangements.

Family offices have notably raised their allocations to private equity and debt strategies, growing their exposure from 16 percent of assets in 2019 to 20 percent in 2025, based on UBS data. Industry experts underscore that NAV loans enable investors to “sweat” their assets more efficiently by accessing liquidity while maintaining their positions.

The NAV lending market is estimated to total around $150 billion, with average transactions roughly $150 million, according to Fund Finance Partners. Despite its relative novelty for individuals, the practice has become more institutionalized in recent years. Ten years ago, NAV lending to individual investors was rare, described by AllianceBernstein as a “one-off unique transaction,” but it is now recognized as a distinct financing category.

Scott Rosen of Ares, a private credit firm, noted that NAV financing is increasingly viewed as an additional liquidity source for wealthy investors. However, the illiquid nature of private equity assets poses challenges for lenders. Goldman Sachs typically offers loans at 25 to 35 percent of asset value, notably more conservative than the 40 to 60 percent loan-to-value ratios seen in other illiquid asset classes such as art. Loan terms commonly span two to three years and often include renewals.

As NAV lending grows among affluent clients, banks and lenders continue to refine their risk assessments and underwriting models to accommodate the complexities of these private equity-backed loans, balancing liquidity needs against the inherent difficulties of valuing and securing illiquid holdings.