JPMorgan is exploring a transaction to reduce its exposure to more than $4bn of private equity-backed NAV loans, according to a report by the Financial Times.
The bank is reportedly in discussions with investors regarding a risk transfer structure linked to a portfolio of NAV loans spanning North America, Europe, and the Middle East. The proposed deal would allow JPMorgan to retain the loans on its balance sheet while transferring a portion of potential losses to third-party investors.
The structure reportedly involves shifting risk on up to 12.5% of a NAV loan pool worth more than $4bn, with investors expected to receive low-teens returns in exchange for absorbing first-loss exposure.
The market for NAV loans has expanded rapidly in recent years as banks and private credit providers compete to build financing relationships with large private equity managers. According to recent estimates from AllianceBernstein, the NAV lending market could grow from approximately $100bn today to $350bn by 2030.
However, the asset class is facing growing scrutiny as prolonged weakness in exits continues to pressure liquidity across private markets. Investors and lenders have also become increasingly focused on the potential impact of AI-driven disruption on software valuations, a key exposure area within many buyout portfolios.
Regulators in both the US and Europe have also raised concerns around the increasing use of NAV financing, warning of “leverage on leverage” risks where borrowing is layered on top of already highly leveraged portfolio companies.
