LP Interest Lending
A bank does not lend against the LP's reported NAV at face value. If the fund uses internal leverage, the LP's $100 of NAV may be backed by $150 in gross assets and $50 in fund debt. The bank looks through the fund structure, haircuts for credit loss, and subtracts the fund's own debt.
Fig. 1. Look through waterfall. $100 LP NAV at 1.5x internal fund leverage.
After a 30% haircut and subtracting the fund's $50 in senior debt, the LP interest is worth roughly $55 under stress. A bank caps the loan at $40 to $50. That is 30 to 50% of reported NAV.
LTV ranges per Macfarlanes, 17Capital, Resonanz Capital.
Structural Protections
DACA
Tri party agreement between borrower, lender, and depository bank. Distributions flow to a pledged account. On default, the lender takes control of the account within two business days.
GP Acknowledgment
The fund manager signs off on the lien. Agrees to redirect distributions to the pledged account. Confirms the LP has not pledged the interest elsewhere.
Admin Reliance Letter
Lender gets direct access to the fund administrator. Monthly data tapes with GAV, NAV, leverage ratio, concentration. The lender verifies internal leverage without relying on the LP or GP.
Negative Pledge + UCC-1
LP cannot pledge the interest elsewhere. Lender files a UCC-1 to perfect the security interest.
Cadwalader, Fund Finance Friday; Mayer Brown, Double Negative Pledges in NAV Credit Facilities (2023)
If a lender needs to exit, they sell the LP interest on the secondary market through advisory firms like Campbell Lutyens. Jefferies data shows private credit LP interests currently trade at roughly 92% of NAV (8% discount). In 2022, buyout interests dropped to 81%.
LP interest secondary pricing as % of NAV. Jefferies Global Secondary Market Review.
Key Triggers
| Trigger | Threshold | Action |
|---|
| Fund leverage breach | Fund increases internal leverage past agreed cap | Borrowing base reduced. Mandatory prepayment. (Admin data tape: GAV/NAV ratio) |
| NAV decline | 20 to 25% drop over rolling 12 months | Event of Default. (Admin data tape) |
| Gate | Fund suspends redemptions | 100% cash sweep. (GP must notify lender within 48 hours) |
| Concentration | Single originator exceeds 15 to 20% of fund | Borrowing base reduced. (Admin data tape) |
| Nonperforming loans | Defaults exceed 5% of fund portfolio | No further draws. Cash sweep. (Admin data tape) |
Fund Level NAV Facility
This is a loan directly to the fund. The lender takes first priority over fund assets. Every LP interest is subordinate. This is what creates the fund's internal leverage. The bank defines a borrowing base of eligible assets, files a UCC-1 over all of them, and monitors through the administrator with daily cash visibility and monthly position level reporting.
| Covenant | How It Works | Breach |
|---|
| LTV maintenance | Monthly against admin data | Repay within 48 hours or pledge assets |
| Max leverage | Fund leverage under ceiling (e.g. 2.0x) | Borrowing window locked |
| Borrowing base | Only eligible assets count. Concentration, duration, quality tests. | Base reduced, reinvestment restricted |
| Interest coverage | Fund income covers debt service | Cash sweep |
| Negative pledge | Cannot pledge fund assets elsewhere | Event of Default |
On default, the lender can replace the GP and wind down the portfolio. This requires language negotiated into the fund's LPA at the time the facility was structured. Per Cadwalader, lenders require funds to "pledge the general partnership interest and ensure that the LPA permits a transferee to replace the GP without cause following a foreclosure."
Macfarlanes; Mayer Brown (2024); Cadwalader, The SPV Pledge; Sidley Austin, Equity Pledges
Indicative Terms: Side by Side
LP Interest Loan
Pricing
SOFR + 400 to 600 bps
Recourse
Full recourse to LP
Collateral
LP interest via DACA
GP NAV Facility
Advance rate
50 to 70% of eligible
Pricing
SOFR + 250 to 400 bps
Tenor
2 to 4 years, revolving
Recourse
Fund assets (limited)
Collateral
First charge on assets
Part 2
The Current Market
Over the past two years, private credit funds have been tokenized and listed as collateral on DeFi lending protocols. This has created a parallel LP interest lending market. But only the LP side. Fund level NAV facilities have no equivalent outside traditional bank desks.
LP Interest Lending: DeFi Protocols
Fasanara's F-ONE fund (London, ~$4B+ AUM, fintech receivables and SME lending, internally leveraged) was tokenized by Midas as mF-ONE and listed as collateral on DeFi lending protocols. Borrowers post mF-ONE tokens and receive stablecoin loans. The LTV: 91.5%. This is the same parameter applied to dozens of other collateral types on the same protocol: wrapped Bitcoin, liquid staking tokens, yield bearing stablecoins, and Pendle principal tokens. It is a standard tier, not a bespoke credit decision.
Fund Level NAV Lending: Does Not Exist
No platform lends to a fund against its portfolio assets with a borrowing base, eligible asset criteria, concentration limits, or quality tests. Outside of traditional bank desks, the entire fund finance market consists of LP interest lending: tokenized fund shares posted as collateral on generalist protocols that were designed for crypto native assets.
Fig. 2. Maximum LTV by lender type. Same underlying fund.
Part 3
What Is Missing
Fund lending works, but the process is manual, slow, and expensive. Every facility requires bespoke legal negotiation. Covenant monitoring depends on human review of monthly data tapes. Enforcement triggers require interpretation and manual escalation. The following structural requirements are well understood, but they have not been standardized or automated.
| Requirement | Current Practice | Bottleneck |
|---|
| Look through to fund leverage | Admin data tape. Lender computes GAV/NAV independently. | Monthly cadence. Manual reconciliation. No standard format across administrators. |
| Covenant monitoring | Leverage caps, concentration limits, default thresholds. Monthly via admin. | Manual review. Each facility has bespoke definitions and thresholds. |
| Cash control on default | DACA redirects distributions to lender within two business days. | Requires tri party coordination. Enforcement is manual. |
| Negative pledge | Contractual prohibition + UCC-1 filing. | Verification depends on borrower disclosure. No centralized registry across lenders. |
| Graduated enforcement | Margin call, cure period, cash sweep, then seizure. | Each step requires human judgment and legal coordination. |
| Fund level NAV lending | Bank lends to the fund directly. First priority on assets. | Origination takes months. Legal costs are significant. Only available to large funds. |
These bottlenecks raise origination cost and underwriting time. Smaller funds are priced out entirely. The structural logic is well established. What is missing is standardization.
Part 4
What Ravariant Builds
Ravariant standardizes the fund lending process. The structural protections are the same ones banks have used for decades. The difference is that they are codified into preset rules rather than negotiated from scratch on every deal. That compresses origination timelines, reduces legal cost, and makes fund lending accessible to a wider range of borrowers.
Fund Administrator Data Feed
The fund administrator pushes NAV, GAV, leverage, and concentration data into a structured data feed. The system sees what a bank sees through its admin reliance letter, but in real time instead of monthly.
Automated Covenants with Cash Sweep
Leverage caps and default triggers encoded in preset rules. On a breach, distributions redirect to the lender automatically. No cure period negotiation. The same structural logic as a DACA and covenant framework, standardized and machine readable.
Graduated Enforcement
Warning, then cash sweep, then partial liquidation, then full seizure. Mirrors the sequence banks follow today. Most existing platforms offer only binary outcomes: healthy or liquidated. Ravariant adds the steps in between.
Fund Level Origination
Ravariant originates loans directly against fund portfolios with borrowing bases, eligible asset criteria, and administrator data feed monitoring. This brings GP NAV facility economics to a wider set of funds by standardizing the process.
The Result
An institutional lender looking at Ravariant sees the protections they require: look through, covenants, cash control, graduated enforcement, negative pledge. The data is more frequent (real time vs monthly). The enforcement is faster (automated vs manual). The structural logic is identical to what fund finance desks have been doing for decades. The difference is that standardization removes the bespoke legal cost and months of origination time from every deal.
The structural protections that institutional lenders require are well understood. They have been used for decades. What has been missing is a standardized way to deliver them without months of legal negotiation on every deal. Standardizing this process compresses underwriting time, reduces origination cost, and tightens risk. Those savings flow to borrowers.
Sources
Cadwalader, "Control or Control Agreement" (Fund Finance Friday)
Cadwalader, "Taking Security in NAV Lending: The SPV Pledge"
Macfarlanes, "NAV Facilities to PE and PC Borrowers"
Mayer Brown, "NAV Credit Facilities: The Spectrum of Collateral Structures" (2024)
Mayer Brown, "Double Negative Pledges in NAV Credit Facilities" (2023)
Sidley Austin, "Equity Pledges: Control, Enforcement, and Strategic Considerations"
17Capital, "NAV-Based Financing: What You Need to Know"
Jefferies, "H1 2025 Global Secondary Market Review"
Campbell Lutyens, Secondary Advisory
Fasanara.com, SEC Form D (April 2025)
RWA.xyz, on chain protocol market data