The Fund’s capital has passed $1tn, but beneath the headlines, cash shortages are as scarce as they seem, says Alex Branton (pictured), chief investment officer at Nodem Capital…
The fund’s finances have grown.
By April 2026, Moody’s estimates the market has surpassed $1tn (£744bn); Haynes Boone’s annual report for 2026 puts it between $1.25tn and $1.75tn. Net asset value (NAV) has risen to normal, with 2025 being the highest deal value on record and many lenders expecting further growth in 2026. Under those headings, however, the income market is a lot less liquid than it looks.
Demand is structural, not cyclical. Distribution has been depressed for four straight years; Bain & Company pegs payouts at around 11 per cent of NAV, compared to an average of 29 per cent between 2014 and 2017, with another $3.8tn tied up in around 32,000 unsold companies. Yet specialist capital is small: even in the secondary, it is only about 2 percent of the private market’s NAV traded in any given year. Pipelines are smaller than the growth story suggests.
It also has a lopside. Large non-bank lenders are built to scale, and bank desks often underwrite services of $200m, $300m and more, secured from traditional buyout portfolios. That is rational unit economics, but it concentrates the entire industry on the same large, brand-name funds, and the predictable result is price competition. Rede Partners reports that NAV spreads have been compressed by nearly 40 basis points over the past year, with large buyout deals now shifting to four to seven percent and large credits often priced at the bottom of that band.
Almost no one is built for another limit. A family office, a middle general partner, a holding company, or a limited partner with a portfolio under $2bn finds the big platforms too big, too slow, or too tight: small ticket sizes rule them out, and established credit boxes can’t handle focused, multi-strategic, or unusual collateral. Nodem Capital is one of the few lenders that intentionally resides in this sweet spot, underwriting services ranging from $20m to $80m for borrowers that exceed average platforms.
It is worth being specific about what these loans are for. Since the 2024 ILPA guidelines, NAV earnings are used less to accelerate DPI and more for leverage purposes. Proskauer’s data shows that follow-on investments are now the biggest use of profits; most institutions support aggressive, value-creating, follow-up, mergers and acquisitions, and financing high-cost asset-level debt, rather than managing distribution. Used in this way, NAV funds correspond to real derivatives rather than single positions.
That difference is important for credit quality, and that’s where doing the work pays off. Smaller, more complex portfolios require more diligence, not less. We write down each portfolio on its own merits, using a sequential, iterative process for properties that a fixed screen would reject.
The growth numbers are real; the conclusion drawn from them is often wrong. The institutional end of NAV lending is crowded and under pressure, while the lower middle market remains underserved. As capital congestion moves into 2026 and beyond, funds and portfolios that are neglected today will need answers, and capital that understands them will matter more, not less. That’s the gap Nodem is here to fill.
This is promoted content produced in partnership with Nodem Capital.
