Two fund finance bigwigs look to enter NAV market

Two executives considered to be among the foremost names in the fund finance market are planning to leave their respective shops to start a fund finance venture.

Michael Mascia, partner at Cadwalader, Wickersham and Taft, and Jeff Johnston, managing director in the asset-backed finance and securitization group and head of subscription financing at Wells Fargo, plan to start a business together later this year. Both Mascia and Johnston declined to comment. But people familiar with the matter say the two plan to launch a venture that would focus primarily on NAV lending, perhaps as soon as May. The two are said to be looking for capital partners and investors.

The business is said by market participants to be aiming to compete with and expand on the business model of 17Capital, which is active in preferred equity and NAV loans, and also manages its own funds, and which was recently acquired by Oaktree Capital.

The two execs are said to be targeting other business lines, as well, including a GP-solutions unit, and at some point, even subscription lending and more. Market rumors suggest the business may involve some form of advisory, perhaps for lenders.

Subscription finance is a significantly lower-yielding product than NAV finance, and most non-bank lenders’ cost of capital and/or return targets are too high for that market to entice them. Some insurance companies have been said to participate passively in the syndication market.

In an emailed newsletter that Mascia sends out each week, “Fund Finance Friday,” the longtime fund finance expert and board member of the Fund Finance Association (where Johnston is also a board member), said: “As some of you may have heard by now, I have announced my intention to join one of my great friends and longtime clients in a fund finance entrepreneurial venture on the business side later this year.” He did not say who the friend and client are, but Private Funds CFO understands it is Johnston. Wells Fargo announced Johnston was leaving the bank last week.

Mascia said in the email that he will remain with Cadwalader’s fund finance team in the meantime, which will be lead by partners Brian Foster, Tim Hicks, Sam Hutchinson, Wes Misson, Trent Lindsay, Kurt Oosterhouse, Jeff Nagle, Nathan Parker and Chad Stackhouse.

Wells Fargo has not announced a replacement for Johnston. Representatives for the bank could not be reached or declined to comment.