CONSHOHOCKEN, Pa., Oct. 24 –Cox Capital Partners (“Cox Capital”), a provider of secondary liquidity solutions for retail private market investors, today announced a pilot lending program designed to give eligible shareholders of non-traded business development companies (BDCs) access to cash while they continue to seek repurchases at Net Asset Value (NAV).
The pilot, the first of its kind in the secondaries market, is designed to allow eligible investors to borrow up to 65% of their holdings’ NAV, with loans expected to carry a fixed interest rate. Cox Capital will manage the process of submitting these shares for repurchase through the underlying fund’s regular redemption process. Proceeds from share repurchases at NAV will be applied toward repayment of the loan, and any distributions exceeding interest obligations will be returned to the shareholder.
The initial pilot is designed to target the largest shareholders, with positions of $1 million or more in non-traded BDCs managing more than $1 billion in assets. Positions of that size are a small fraction of shareholder accounts, typically around 1% to 5%. Cox Capital’s tender offers remain the primary liquidity option for the large majority of shareholders, and the lending program is designed to complement them.
The pilot complements Cox Capital’s existing secondary liquidity solutions. Over the past six years, Cox Capital has built a platform for sourcing and executing secondary liquidity transactions for retail investors in non‑traded BDCs and other illiquid vehicles, working with financial advisors and intermediaries across independent broker‑dealers, RIAs, and major wirehouses. Cox Capital structures its tender offers at varying discounts to NAV, with pricing determined by several factors, including investor demand for secondary liquidity, prevailing market conditions, and the underlying risk characteristics of each fund. These considerations allow the firm to establish purchase prices that reflect the distinct investment profiles, liquidity constraints, and market dynamics affecting individual funds.
The lending program gives eligible shareholders another option when they need cash but face limits on how much they can redeem through their fund’s periodic repurchase programs.
“Some shareholders need to exit immediately and are willing to accept our bid. Others would prefer to borrow against their investments while continuing to seek redemptions at NAV,” said John Cox, CEO of Cox Capital Partners. “Our goal is to serve both groups. A seller pays a discount, a borrower pays a rate, and the investor decides how and when to access their capital.”
A New Liquidity Option for Retail Investors
Non-traded BDCs have attracted growing interest from wealth advisors and individual investors seeking exposure to private markets. However, unlike publicly traded securities, these vehicles generally offer limited opportunities to redeem shares. When redemption requests through a fund’s established repurchase program exceed the quarterly limit, often set at 5% of outstanding shares, shareholders may receive only a portion of the cash they requested, leaving them to wait for subsequent redemption windows.
Cox Capital’s lending program is designed to provide eligible shareholders with immediate liquidity while Cox Capital submits their shares for repurchase through the underlying fund’s regular program. Repurchases remain subject to the fund’s terms, applicable NAV, and acceptance of the requests.
Under the proposed structure, eligible shareholders can pledge their holdings as collateral and receive an advance of 50% to 65% of NAV, depending on the underlying fund and other underwriting considerations. Loans are expected to carry a fixed interest rate and an initial two-year term, with extension options. Financing is expected to be provided by Cox Capital affiliates and institutional capital partners.
Cox Capital will manage the administrative process on behalf of borrowers, submitting pledged shares for repurchase in each available redemption window. As shares are repurchased by the fund, the proceeds will be applied directly toward reducing the outstanding loan principal. Distributions exceeding interest obligations will be passed through to the shareholder.
Borrowers are not expected to incur prepayment penalties on principal repayments funded by the underlying fund’s repurchase program. They may also elect to sell their remaining holdings to Cox Capital at its then-current purchase price, with the outstanding loan balance settled from the proceeds of the sale.
“Lending against private fund interests is already an established practice among institutional investors,” Cox added. “We’re working to bring a similar solution to the wealth management market, where investors and their advisors need more flexibility to manage liquidity. Just as important, we’re handling the redemption process so that advisors and their clients don’t have to manage repeated submissions themselves.”
Cox Capital Seeks Participants for Pilot Program
Cox Capital is forming an initial group of participants to help test and refine the lending program ahead of any broader rollout. The pilot will initially focus on advisors and directly registered shareholders with individual positions of at least $1 million in non-traded BDCs managing more than $1 billion in assets. Participation will be limited to taxable accounts; IRAs and other retirement accounts will not be eligible.
The timing and scope of any broader availability will depend in part on custodial arrangements, with discussions involving custodians at various stages. Cox Capital welcomes inquiries from qualified investors, financial advisors, and custodians interested in participating in the pilot or helping shape the program.