Overcrowding of private credit funds leading to underpricing of risk
private credit market has led to underpricing of risk and distortion of the market, EY said in a report. In the past six months, global and domestic funds have raised more than $2 billion to invest in performing credit, stressed credit and special situation opportunities, it said.
There is strong interest among family offices and high net worth individuals to invest in private credit funds, said the report.
This seems to be a rising trend and may become a large source of capital to fuel India’s private credit growth story, it said.
In the first half of 2023, at least 15 new alternative investment funds (AIFs) registered with credit and special situation orientation. Besides, 51 AIFs are in the process of registration with the Securities and Exchange Board of India (SEBI), with 11 of them likely to be private credit funds, as on June 30, according to SEBI data.
RV Capital Management, a Singapore based hedge fund has floated a private credit fund through AIF vehicle and is planning to raise $50 million with a green-shoe option of an equal amount.
Similarly, Nippon Life is planning to launch a private credit fund via AIF vehicle in India with $244 million. Sundaram Alternate Assets is planning to raise up to $182 million through its fourth real estate private credit fund and will focus on investments in growth and special situation opportunities.
In the first half of 2023, $4 billion was deployed across 18 transactions.
