Investors Marooned in Private Equity Mull 10% Loans to Get Cash

Investors with money stranded in private equity funds are weighing an expensive solution: borrowing against their stakes, sometimes at double-digit interest rates, until the market for their holdings turns around.

“Net-asset-value” financing to free up cash has already taken off among private equity firms holding $4.8 trillion of assets who’ve balked at selling investments amid a soft market for mergers and acquisitions. Now lenders are pitching those firms’ clients on the loans as well.

Lenders such as 17Capital, Apollo Global Management Inc. and Ares Management Corp.see a growing market targeting investors in the PE funds. In theory, it’s ...