What high net worth investors can expect from private credit funds

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₹6.96 trillion, up by around 24% on a year-on-year basis. Debt AIFs function like a fund, where an investor entrusts its savings to a portfolio manager, and the portfolio manager pools savings from various investors and uses that pooled corpus in lending investments on behalf of investors. So, investors in private credit funds get exposure to multiple fixed income investments for the same amount of investment and active portfolio management of those investments.

Private credit funds can deploy different investment strategies to optimize the returns for the investors. For example, these funds could focus on different stages of the corporate life cycles. Some funds could focus on the start-up phase, some could come in a little later once the business has gained a certain scale and some funds might only look at more established businesses.

Then there can also be funds looking at opportunities in stressed businesses. A fund could also use a combination of these strategies. These funds might also decide to lend for certain use-cases.

These could be for transaction requirements like mergers and acquisitions or working capital needs or capital expenditure (capex) or special situations where certain investors need to be given exits. These funds could also diversify across businesses and lend to infrastructure assets, real estate assets, financial institutions or other corporates. Growth potential Banks’ exposure to the retail segment has increased to 33% and its share of single A minus and above credit has increased to as high as 85%.

This leaves a wide white space for private credit funds to fill the gap for lower credit rated corporates. Single A minus is just a notch above investment grade in terms of credit ratings. With the