Explain NAV lending at fund level: what it is, legitimate uses, and why LPs have pushed back.

A NAV facility is debt raised by the fund itself, secured against the net asset value of the whole portfolio rather than a single company — distinct from subscription lines, which are secured on undrawn LP commitments and used early in a fund's life. Legitimate uses: funding follow-on investments or add-ons late in the fund when capital is fully drawn, bridging to a known exit, or supporting portfolio companies through a defensive period without a fire-sale. The controversy centers on using NAV loans to fund distributions: the fund borrows against unrealized valuations to pay LPs 'distributions' that are really leverage, dressing up DPI while adding a senior claim across the whole portfolio — cross-collateralization means one bad asset can force sales of good ones, and the borrowed distribution may effectively be recallable. LP pushback demands: disclosure and consent (many LPAs never contemplated fund-level leverage), clarity on whether distributions are borrowed or realized, cost justification versus simply waiting for exits, and covenant transparency. Diligence questions for any fund: facility size versus NAV, purpose, LTV triggers, and which assets secure it. ILPA has issued guidance urging exactly this transparency.