Capital Call Financing: An Emerging Opportunity for Investors

In a time when traditional fixed income investments face mounting pressure, capital call financing is rapidly gaining traction among institutional investors. This asset class can offer superior risk-adjusted returns, low credit risk, and exposure to alternative risk drivers.

Capital call financing involves short-term loans to private equity funds, backed by the uncalled capital commitments of their investors, known as Limited Partners (LPs). When a fund identifies an investment opportunity, it can act quickly using a capital call facility, without immediately drawing capital from LPs. This accelerates the investment process and can enhance returns.

The capital call financing market is steadily growing and is currently estimated at around 800 billion dollars. While traditionally dominated by banks, regulatory changes and increasing demand for flexible financing have opened the door for alternative lenders, including institutional investors.

Thanks to our strong track record and first mover advantage, we developed a product range that offers access to a new asset class alongside market leading co-investors. Based on market experiences, Capital call finance can offer institutional investors a target yield of Euribor + 200bps with investment-grade risk profile and short duration.1

As the private equity sector continues to expand and demand for efficient financing solutions rises, capital call financing is positioning itself as a promising asset class for institutional investors seeking yield and portfolio diversification.

Curious about the possibilities of capital call finance? Read what’s behind the rise of this attractive asset class here

[1] Target yield are gross yields as observed in current market circumstances. Target yields may be subject to change. Capital Call Financing spreads; EUR facilities average AA/A  based on Aegon AM investment pipeline data