Edelweiss eyes $1b corpus for latest alternative investment fund

Edelweiss aims to raise up to a $1 billion corpus for its latest alternative investment fund (AIF), Edelweiss Special Opportunities Fund (ESOF) III, according to a senior executive of the diversified financial services group.

This is a nearly threefold increase from the $350 million it raised in April 2017 for ESOF II. Its first credit fund ESOF I garnered $230 million. ESOF focuses on investing in the performing credit space.

“We are looking to raise close to $1 billion in the 3rd tranche of our performing credit strategy. Like in our distressed fund, investors will be largely offshore institutions such as pension funds, insurance companies, and endowments. We will also have a sleeve for our ultra-high net worth investors and select family offices,” said Hemant Daga, president and deputy chief executive officer, Edelweiss Global Asset and Wealth Management.

The fund will invest in holding firms or operating firms that are seeking growth, he said.

The recent crisis such as defaults by Infrastructure Leasing and Financial Services Ltd and the resulting liquidity crunch presents a significant opportunity for alternative investment fund-based lending structures, Daga said.

“In the last couple of months, the credit market has gone through a dislocation and credit spreads have widened. Platforms doing structured credit were either mutual funds, NBFCs or AIFs. Mutual funds and NBFCs have slowed down a little because of the liquidity crunch and therefore a bigger opportunity opens up for alternative asset managers like us. From an opportunity perspective, it is a more suitable time for us to launch the 3rd tranche (ESOF III) of our performing credit fund because returns adjusted for the risks have become attractive,” he said.

In an AIF structure, money is raised from global institutions which aim to participate in the India growth story over the next 7-10 years, and assets and liabilities are matched well in a long-term structure like this, he said.

Edelweiss successfully exited its first credit focused fund and is about 65% deployed in the second fund. It expects to have a first close of ESOF III in the second quarter of FY20.

“Performing credit strategy is a core part of our alternative asset management business and we have a strong 10-member investment team. With the launch of ESOF III, we are going to add 5-6 people,” said Daga.

ESOF III is also the third fund for which Edelweiss is targeting a corpus of close to billion dollars.

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.

This article was first published on livemint.com