ARTICLE
24 January 2025

Evolving Competitor Definitions In Fund Finance

MB
Mayer Brown

Contributor

Mayer Brown is a distinctively global law firm, uniquely positioned to advise the world’s leading companies and financial institutions on their most complex deals and disputes. We have deep experience in high-stakes litigation and complex transactions across industry sectors, including our signature strength, the global financial services industry.
Recent developments in fund finance documentation reflect a significant shift in how insurance companies are treated under assignment provisions.
United States Finance and Banking

Recent developments in fund finance documentation reflect a significant shift in how insurance companies are treated under assignment provisions. Traditionally, “competitor” definitions have served to restrict loan assignments to entities competing with fund borrowers, except during default scenarios. While commercial and investment banks have long enjoyed carve-outs from these restrictions (though their sponsored funds remained subject to them), a new market standard is emerging.

Insurance companies are increasingly excluded from competitor definitions, while their affiliated funds continue to be classified as competitors. This treatment now mirrors the longstanding approach to commercial and investment banks, marking a notable evolution in market practice.

This shift has been driven by the increasingly complex and multifaceted role insurance companies play in the private capital markets. Insurance companies now operate across the entire private equity ecosystem: they act as direct lenders in fund finance facilities; serve as limited partners investing in private equity funds; own or control fund sponsors; and in some cases are owned by large private equity sponsors. This web of relationships creates unique considerations in competitor definition negotiations, as a single insurance company might simultaneously be a lender to a fund, an investor in that same fund (or a competing fund) and be owned by a competing sponsor.

The market's response has been to recognize that insurance companies' core lending activities should be treated like those of traditional financial institutions, while maintaining competitive safeguards around their fund management operations. This nuanced approach allows for greater liquidity in fund finance markets while preserving borrowers' interests in restricting assignments to competitive fund management platforms.

Looking ahead, fund borrowers and their counsel should expect continued evolution in how competitor definitions address insurance companies' multiple market roles. As insurance companies further expand their presence across the private capital landscape, facility documentation will likely require increasingly sophisticated carve-outs and restrictions to balance market liquidity with competitive concerns. This trend signals a broader transformation in fund finance as insurance companies cement their position as versatile and influential market participants.

Visit us at mayerbrown.com

Mayer Brown is a global services provider comprising associated legal practices that are separate entities, including Mayer Brown LLP (Illinois, USA), Mayer Brown International LLP (England & Wales), Mayer Brown (a Hong Kong partnership) and Tauil & Chequer Advogados (a Brazilian law partnership) and non-legal service providers, which provide consultancy services (collectively, the "Mayer Brown Practices"). The Mayer Brown Practices are established in various jurisdictions and may be a legal person or a partnership. PK Wong & Nair LLC ("PKWN") is the constituent Singapore law practice of our licensed joint law venture in Singapore, Mayer Brown PK Wong & Nair Pte. Ltd. Details of the individual Mayer Brown Practices and PKWN can be found in the Legal Notices section of our website. "Mayer Brown" and the Mayer Brown logo are the trademarks of Mayer Brown.

© Copyright 2025. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More