Finding Alpha Volume 2

A Message from Our Leaders

As we approach Thanksgiving, we want to take a moment to express our heartfelt gratitude to each of you. Your partnership, trust, and collaboration have been instrumental in shaping our successes and growth this year. We truly appreciate the confidence you place in us and the role you play in making our work meaningful and impactful. We’d also like to recognize the dedication and hard work of our team members, whose commitment to excellence and service drives our shared accomplishments every day. Together, we have built a foundation we can be proud of, and we look forward to continuing to build upon it in the coming year. Wishing you and your families a joyful and restful Thanksgiving holiday. Thank you again for being such an integral part of our journey.

With gratitude,

Trevor Freeman and Stephen Prostor

The Foundation of Our Mission

The Fund Finance division at Axos Bank was built to provide a comprehensive suite of financing solutions tailored specifically to the needs of Private Equity, Private Credit, and Venture Capital firms. With a focus on delivering NAV, Hybrid, Subscription, Management Company, and General Partner Capital Contribution financing, Axos sought to create a specialized offering that provides small to mid-sized managers with the full Fund Finance suite of products. This initiative was designed to provide managers with the full fund finance toolbox while seamlessly integrating best-in-class treasury services to support clients' operational needs.

Leveraging expertise in subscription lines, hybrid facilities, and NAV-based lending, the Axos Fund Finance team has rapidly positioned itself as a key player in the market, supported by a deep understanding of the unique dynamics within the alternative investment space. This combination of specialized lending solutions and a client-first mindset has propelled Axos into a competitive position, consistently delivering value to fund managers and their portfolios.

Market Pulse

NAV Lending: The Evolving Landscape

By Trevor Freeman and Stephen Prostor

Over the past year, our Fund Finance team has received numerous NAV loan requests, participated in law firm bootcamps and industry conferences, and reviewed a growing body of NAV-related articles authored by seasoned fund finance attorneys. Based on these experiences, we believe NAV lending is evolving into two distinct structuring approaches:

·?A Margin Lending or ABL Approach: This applies varying advance rates to different types of fund investments, based on cash flow, liquidity, market-to-market frequency, valuations, and whether the valuations are done by the borrower or a third party. When available, additional forms of fund-level credit support may be incorporated to enhance the structure.

·?A Securitization Approach: This approach applies a flat advance rate to an entire portfolio of more homogeneous fund investments, such as a portfolio of equity interests in leveraged private companies (e.g., a mid-market buyout fund). Additional fund-level credit support may be added when available.

?What’s interesting to us—and clear in hindsight—is that the subscription credit facility market has undergone a similar evolution over the past two decades.

?In the 2000s, banks started assigning different advance rates to investor types based on their ratings or asset size. For example, a 90% advance rate against A-/Aa3 and higher-rated investors, reflecting the margin lending approach.

?In the 2010s, more banks adopted a flat advance rate against "included investors," a defined group that excluded certain investors based on type, size, or side letter issues. In many cases, however, this flat rate was applied to all investors, reflecting the securitization approach.

With our team's expertise in asset-based lending (ABL), leveraged cash flow lending, and margin and securities-backed lending—combined with the banking industry's broader experience in secured lending—we believe NAV lending will evolve into the two distinct structuring approaches outlined above.

What does this mean for Axos Fund Finance? It provides an opportunity for us to collaborate with our experts in ABL, cash flow, real estate (equity and debt), and non-real estate lender finance to structure a customized NAV or hybrid lending solution tailored to your fund's unique needs.

Recognizing Trailblazers

Daniel Lynch – Sr. Associate

Dan is a Senior Associate in Fund Finance, actively building his skills in deal execution and client support. He has played a key role in successful transactions, including a subscription credit facility for a single investor vehicle. Dan is broadening his understanding of underwriting, contributing to the team’s success, and is regularly recognized in "Tombstone Tuesdays" for his work.

He holds a Bachelor's degree in Finance with a minor in Economics from Fordham University and is currently obtaining a certificate in Credit Risk Management.

As a former captain of Fordham University's nationally ranked water polo team, Dan remains actively involved as a mentor to current student-athletes, supporting their development both in and out of the pool.

Where Have We Been?

20th Annual ACG New York Wine Tasting Gala – November 7, New York City

The Fund Finance team at Axos Bank recently attended the 20th Annual ACG Wine Tasting Gala in New York City, an event that brought together key players from the middle-market sector. This gathering provided an excellent opportunity for the team to engage with clients and stay updated on the latest industry trends.

Additionally, the team was invited to attend the Lunch in the Name of ACG event, where they mingled with middle market professionals.

Contact Our Team

Trevor Freeman

?SVP, Managing Director and Head of Fund Finance

Direct: 646-263-3648

[email protected]

Stephen Prostor

SVP, Managing Director and Head of Portfolio Management

Direct: 646-331-6719

[email protected]