Financial services focused Edelweiss Group is eyeing the first close of its latest alternative investment fund, Edelweiss Special Opportunities Fund (ESOF) III, at $600-700 million by December-January, Venkat Ramaswamy, executive director of Edelweiss Financial Services Ltd and co-head at Edelweiss Global Investment Advisors, said in an interview.
ESOF III is a credit fund that focuses on investing in the performing credit space and will lend to companies that need funds for growth. It will not invest in areas such as real estate and distressed credit opportunities.
“We have already deployed up to 70% of our previous fund and have launched the third fund with the same strategy. We expect to raise up to $1 billion in the next six months, which will make this the largest Indian fund in the corporate credit space. Our first close target is $600-700 million and it is likely to happen by December-January," said Ramaswamy.
The third fund’s corpus will be nearly three times the size of the previous fund, ESOF II, which closed at $340 million in April 2017. Its first credit fund ESOF I garnered $230 million.
The financial services group hopes to raise the capital from 10-12 large foreign institutional investors.
“Our partners (limited partners or LPs) are large institutional investors, including some of the largest global, predominantly North American and European insurance companies and pension funds. We expect to raise the fund in the next six months," said Ramaswamy.
“The latest fund will take our assets under management in the alternative investments business from $3.5 billion to $4.5 billion," he said.
The fund will invest in Indian holding or operating firms that are seeking growth.
“The strategy would largely remain the same. We will continue to lend to corporate India but will not fund real estate and distressed opportunities," said Ramaswamy.
Indian markets have remained volatile amid an economic slowdown and credit crunch in the system, but Ramaswamy said it was the strong corporate governance track record of the group in the previous funds that has helped it raise funds from foreign investors.
Of the 10-12 institutional investors that aim to invest in ESOF III, most are expected to be existing investors in Edelweiss’s other alternative funds.
“This itself shows their confidence in us. Repeat investors are the bedrock of the alternative assets industry as these funds are closed-ended and there has to be a high amount of trust in the fund manager," said Ramaswamy.
“A good track record of returns is a necessary but not sufficient condition. It is a good governance track record that shows how a company has behaved in the worst of times. The fact that we are getting billion dollar commitments for our credit fund from institutional investors in such a stormy market is a sign of our track record," he said.
In January, Edelweiss closed its distressed assets focused fund EISAF II, raising a corpus of $1.3 billion. The fund received commitments from global investors, including large insurance companies and pension funds from North America and Europe, as well as high net-worth individuals and family offices in India and overseas.
Edelweiss committed around $300 million of its own capital for the EISAF II fund.