Reliance AIF to raise Rs. 1,000 crore debut fund
What's the story
Reliance AIF, a unit of Reliance Nippon Life Asset Management, is raising its first credit fund of Rs. 1,000 crore called Reliance Yield Opportunity AIF Scheme 1, starting this March. The company is trying to raise as much as Rs. 250 crore, with a greenshoe option of Rs. 750 crore. A greenshoe option refers to additional money that a fund may choose to retain.
Details
Details of the fund
According to Reliance AIF officials, this fund will tap into rising distressed debt among Indian banks, which are burdened with growing bad loans and seek to offload such assets. The company will use funds for acquisition financing, holding company financing and loans against shares. Fund managers will also hunt for investments in debt instruments of emerging non-banking financial companies (NBFCs) and micro-finance institutions.
Data
What is a credit fund?
It is a type of fund scheme that invests in relatively riskier corporate bonds to earn higher interest rates. Fund managers invest in securities that mature in 1-3 years, unlike long maturity bonds. Lower-rated securities tend to offer earn higher rates.
Revenues
Why is this announcement important for fund investors?
Many large international alternative investment firms have credit as another asset class. Credit Fund is emerging as an important business for PE firms. Reliance AIF joins a string of major alternative investment firms, including KKR and Baring Private Equity Asia, which are putting together similar credit funds, to leverage the business opportunity in the space. The new fund is targeting around 12-12.5% returns annually.
Definition
What are alternative investment funds?
Alternative Investment Funds are the investments which, unlike traditional modes of investment such as stocks, bonds, cash, property etc, include the commodities, private equity, hedge funds, venture capital, and financial derivatives as well as assets such as paintings, other arts, wines, antiques coins and stamps.