To obtain liquidity amidst a dearth of distributions, LPs are increasingly pledging their interests in private funds as collateral for financing facilities. Structurally similar to net asset value facilities used by sponsors, LP portfolio financing facilities are becoming popular among all types of borrowers – especially family office and institutional investors – and lenders. As a relatively new form of financing, however, the market around key terms and provisions in financing agreements is still evolving, and many LPs are unaware about the facilities as an alternative source of liquidity. This first article in a two-part series explores the trends driving the growing use of LP portfolio financing facilities; describes the types of LPs and lenders pursuing the facilities; and details some of the key terms and conditions the parties negotiate when putting the facilities in place. The second article will delve into certain challenges that LP portfolio financing facilities pose, including dealing with distributions and valuations in the context of the loan-to-value ratio and how to ensure lenders are protected in event of default scenarios. See “What Does It Take to Get Across the Finish Line in the Current Fundraising Environment?” (Mar. 7, 2024).