Edelweiss raises $900 mn for structured credit fund

Mumbai: Edelweiss Alternative Asset Advisors (EAAA), part of Edelweiss Asset Management, on Monday said that it has achieved the final close of its $900 million ( ₹6,600 crore) alternative investment fund - ESOF , the company said in a statement.

The third in the Special Opportunities Series, ESOF III, was launched with an investment mandate centered around the performing credit space with a focus on providing structured credit to Indian companies, the statement said.

The ESOF III strategy has received investments by the Canadian Ontario Teachers’ Pension Plan Board, Florida’s State Board of Administration, Swedish Pension Fund - AP4 and a European Insurance Investor, among others.

“Banks and Mutual Funds have been receding from the structured credit space in line with global trends and the current dislocation has further accentuated the need for long-term flexible capital. This presents a huge opportunity for private debt players and it’s reassuring to note that the present market environment has not deterred investors who are keen to participate in India’s long term growth story,” said Rashesh Shah, chairman and chief executive officer of Edelweiss Group.

Earlier this year, Edelweiss announced the closure of its infrastructure yield fund - EIYP, raising $450 million (Rs3,300 crore). With the ESOF III fundraise, the EAAA platform now manages assets worth approximately Rs30,000 crore.

According to Hemant Daga, chief executive officer at Edelweiss Asset Management, the Indian economy offers significant opportunity for offshore investors that are looking for yield in the current global macro environment.

“If you see the current macro backdrop, globally 80% of bonds are yielding less than 2%. If you look at data for 10 years ago, 65% of bonds globally were yielding 5%. So, if you compare the global backdrop with where India is, I think India is one of the few large economies where real returns are still positive. This creates an exciting opportunity for both global and domestic investors to participate in,” he said.

Daga added that the market for private credit investments has grown significantly in the last decade.

“ESOF III is the largest private debt fundraise in the country this year. We started with our first fund of Rs1,000 crore of AUM 10 years back. The second fund was Rs2,000 crore in 2014 and now in 2020 the ESOF III fund is Rs6,600 crore. The opportunity has significantly expanded in the last decade,” he said.

“We are seeing significant opportunities in the space with a lot of credit players withdrawing from such opportunities. The overall opportunity pool is close to ₹40,000-50,000 crore every year, just in the performing credit space,” he added.

The fund’s mandate is to provide flexible patient capital for mid market growth companies. It will provide capital for growth, acquisitions as well as for stake enhancements, said Daga.

“We believe, close-ended asset management vehicles are the preferred option for long-term credit investments as they are unlevered, patient capital vehicles. Having built deep expertise in the space, this fund raise is a strong validation of our capabilities to originate, underwrite, structure and realize private credit strategies,” he said.