Edelweiss arm looks to launch new credit funds in 2021 to tap demand

Edelweiss Alternative Asset Advisors (EAAA), part of the Edelweiss group, is looking to launch a short-duration credit fund and a distressed fund this year to tap the demand for credit in the country.

The short-duration credit fund, which will be an alternative investment fund, targets to raise Rs 2,000 crore. The fund has an investment cycle of 24-36 months compared to 36-60 months in its previous funds. The fund manager is looking to launch it soon, said Hemant Daga, chief executive at Edelweiss Asset Management.

The credit fund will be of four-year duration compared to seven to nine years for earlier funds. The new fund is expecting to give returns of 11-13 per cent against 17-20 per cent in previous funds.

“The fund will give loans to operating and holding companies which are rated A and above,” he said.

“As economy recovers, the requirement for credit is coming back. With mutual funds vacating space, the risk-adjusted returns are really good in this space,” said Daga. Edelweiss raised a Rs 6,600-crore credit fund in October last year out of which 15 per cent will be deployed by April this year, he said. In December 2018, it raised Rs 9,300 crore for its India Special Asset Fund II.

The fund manager is also looking to launch special situations fund III in the next four to five months, he said.

The fund will have a corpus of $1.5 billion (over Rs 10,000 crore) and a duration of eight to nine years. The fund has return expectations of Rs 21 to Rs 23 in rupee terms, he said, adding that it will do deals between Rs 200 crore and Rs 700 crore.

“After Covid 19, the type of opportunities have expanded. Today, you can buy senior or junior debt pools, retail pools and so on,” he said. Daga said banks do not want to do wholesale lending due to non-performing asset (NPA) problems and non-banking financial companies (NBFCs) are moving out of the space due to asset-liability issues, he said. He said the fund manager is also looking to launch a real estate credit fund early next year. In 2019-end, it raised a $250 million last mile financing fund – to invest in real estate projects – which is fully deployed. Its first real estate fund, raised in 2018, has been 60 per cent deployed so far.