Danish pension P+ weighs NAV and GP financing alongside direct lending

Danish pension fund P+ is weighing net asset value (NAV) lending and GP financing as additions to its direct lending portfolio. Mikkel Loft, the director responsible for private credit investments at P+, discussed the strategy in an interview published Nov. 12 by HedgeNordic.

Private credit sits inside P+'s private investments portfolio, where Loft said it diversifies the book and generates running income while capturing an illiquidity premium over liquid credit. "The two main purposes are to act as a diversifier and to generate running income from the portfolio," he said.

For an LP weighing NAV and GP loans, diligence shifts to loan-to-value, the number of positions behind a facility and the pace of exits, rather than the spread alone. A NAV loan is a claim on a private equity fund's holdings, not on one company's cash flow. "Even though some say it is leverage on leverage, a low LTV combined with the portfolio effect can more than make up for it," Loft said.

Loft attributed the interest to two forces: the growth of private equity and a slower exit market that keeps more capital locked within funds.

The two structures differ by collateral. A NAV facility is secured against a fund's underlying investments, spreading exposure across many holdings rather than one borrower. GP financing provides liquidity to a private equity manager against its future economic interests. Loft framed both as an extension beyond subscription lines to portfolio-level financing.

Traditional direct lending remains an important part of the portfolio, so the new areas are additions rather than replacements. The same slowdown that creates demand for these loans also determines how quickly the capital behind them is returned.