Kotak Alternate Asset Managers Seeks To Raise $2 Billion For Private Credit Fund

Alternate Investments offer investors a chance to diversify their investment portfolio by adding non-traditional investment options. Notably, such investments are gaining popularity. A report by financial information company Bloomberg said that Kotak Alternate Asset Managers Ltd plans to raise $2 billion for a new private credit fund.

The alternate asset management company plans to cater to the rising demand for alternate investment products in India, as per the report which cited the company’s Chief Executive Officer, Lakshmi Iyer.

Alternate Investment Funds (AIF) typically invest in asset classes such as private equity, venture capital, hedge funds, real estate, commodities, and derivatives. The report also claimed that Kotak Alternate Asset Managers’ new private credit fund will offer multiple financing options such as acquisition funding, equity-backed loans, and annuity assets.

Iyer added that the fund will seek to generate returns ranging from 18 per cent to 20 per cent through structured credit instruments with tenors between four and seven years.

“We’re seeking an investment return in the 18 per cent to 20 per cent range, structured credit instruments will be the underlying, with tenors ranging from four to seven years,” Iyer said.

Iyer claimed that the asset management company’s previously launched funds such as the Strategic Situation Fund I have delivered over 20 per cent compound annual growth rate in local currency terms since its inception in 2019.

The report claimed that Kotak Alternate manages funds worth nearly $20 billion, of which nearly $6 billion is spread across 14 private credit funds. Notably overseas investors, including family offices and wealthy individuals, make up the bulk of the assets.

Notably the private credit market in India is also growing, with investments reaching $9.2 billion across 163 deals last year, the report said citing an Ernst & Young study. However, the space is also witnessing increasing competition making it harder to execute deals and may impact credit quality, the report warned. The proposed fund will be open for subscription for both offshore and local investors.

Earlier in January, the Kotak Strategic Situations India Fund II was in the headlines after the fund made an investment of Rs 940 Crore in Neuberg Diagnostics Private Ltd. As per a release the investment was made to support Neuberg’s inorganic expansion strategy. Additionally, the Fund is also likely to acquire about a 15 per cent stake in Neuberg Diagnostics, in a pre-IPO round, according to a report by the Economic Times.